10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 0-24341

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	54-1865271
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1343 Main Street, Suite 301, Sarasota Florida	34236
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number, including area code: (941) 330-1558

Securities registered pursuant to Section 12(b) of the Act:

Not applicable

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes  x    No  ¨

The aggregate market value of the voting stock held by non-affiliates of the registrant (based on the closing price of the registrant’s common stock on the NASDAQ National Stock Market) on March 11, 2004 was $283,446,016.*

As of March 11, 2004, the registrant had 10,798,429 shares of common stock outstanding.

Documents Incorporated by Reference

Portions of the proxy statement for the annual meeting of stockholders to be held on May 3, 2004 are incorporated by reference into Part III.

* Solely for purposes of this calculation, all directors and executive officers of the registrant and all stockholders beneficially owning more than 5% of the registrant’s common stock are considered to be affiliates.

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TABLE OF CONTENTS

		Page
Part I
Item 1.	Business.	4
Item 2.	Properties.	17
Item 3.	Legal Proceedings.	18
Item 4.	Submission of Matters to a Vote of Security Holders.	18
Part II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters.	19
Item 6.	Selected Financial Data.	21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation.	22
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.	32
Item 8.	Financial Statements and Supplementary Data.	34
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	60
Item 9A.	Controls and Procedures.	60
Part III
Item 10.	Directors and Executive Officers of the Registrant.	61
Item 11.	Executive Compensation.	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management.	61
Item 13.	Certain Relationships and Related Transactions.	61
Item 14.	Principal Accountant Fees and Services.	61
Part IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K.	62
Signatures

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THIS ANNUAL REPORT ON FORM 10-K CONTAINS CERTAIN STATEMENTS THAT ARE NOT HISTORICAL FACTS AND MAY BE FORWARD-LOOKING. SUCH STATEMENTS INVOLVE ESTIMATES, ASSUMPTIONS, RISKS AND UNCERTAINTIES. THERE IS NO ASSURANCE THAT FUTURE RESULTS WILL NOT DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO BE MATERIALLY DIFFERENT FROM THE FORWARD-LOOKING STATEMENTS ARE DISCLOSED UNDER THE HEADING “BUSINESS—RISK FACTORS” AND THROUGHOUT THIS FORM 10-K.

PART I

Item 1. Business

The Company is one of the leading importers and distributors of alcoholic beverages in Poland. The Company operates the largest nationwide next-day alcoholic beverage delivery service in Poland through its nine distribution centers and 58 satellite branches located in Poland’s principal cities, including Warsaw, the Company’s central headquarters. The Company currently distributes approximately 850 brands in five categories: beer, spirits, wine, soft drinks and cigars. The Company is the exclusive importer and distributor in Poland for 15 international beers, including Guinness, Corona, Foster’s, Beck’s Pilsner, Bitburger and Budweiser Budvar. The Company is also one of the leading distributors of locally produced beers, distributing over 25 brands in selected regions. The Company currently distributes approximately 300 spirit products, including leading international brands of scotch, single malt and other whiskeys, rums, bourbons, Polish vodkas, tequilas, gins, brandy, cognacs, vermouths and specialty liquors, such as Johnnie Walker, Smirnoff, Absolut, Finlandia, Bacardi and Ballantines. In addition, the Company is the exclusive importer and distributor in Poland for approximately 380 wine brands, including B.Ph. de Rothschild, Torres, Bolla, Concha y Toro, Penfolds, Sutter Home, Georges Duboeuf, Mondavi, Veuve Clicquot and Codorniu. In addition to its distribution agreements with various alcoholic beverage suppliers, the Company is the exclusive importer in Poland for Dunhill Cigars, General Cigar products and Evian water.

The Company distributes its products throughout Poland to approximately 31,000 outlets, including off-trade establishments, such as small businesses, medium-size retail outlets, petrol stations, duty free stores, supermarkets and hypermarkets, and on-trade locations, such as bars, nightclubs, hotels and restaurants, where such products are consumed.

Industry Overview

Consumption. In 2003, Poland was the fourth largest consumer of vodka in the world according to Company estimates. The total retail market for alcoholic beverage products in Poland was approximately $4.0 billion in 2003. Traditionally, the population of Poland has primarily consumed domestic vodka, but in recent years there has been a continuing shift in the consumption habits from vodka to other types of alcohol, many of which are imported, such as beers, wines and spirits. The Company believes that in recent years the shift in consumption habits is a result of:

• stabilization of the Polish economy, including increased wages, as well as a decrease in the rate of inflation from 13% in 1997 to 1.7% in 2003;

• an increase in tourism, which has created a demand for imported products;

• an increase in multinational firms doing business in Poland, which has brought both capital into the country and new potential customers for the Company’s products; and

• increased availability and decreased real prices for imported products, especially after the Excise Tax reduction which took effect October 1, 2002.

Distribution. The market for the distribution of alcoholic beverages in Poland remains highly fragmented. There are numerous alcohol distributors spread throughout the country, mainly delivering a range of beers, wines and spirits. Furthermore, distributors have been located regionally, rather than nationally, due to the difficulties in establishing a nationwide distribution system, including the capital required to set up such a system, and an extremely poor road infrastructure. Distributors of alcoholic beverages deliver to both off-trade sites and on-trade sites. Off-trade sites include Polish-owned and managed businesses, such as small grocery stores, as well as major chain stores. On-trade sites include bars, nightclubs, hotels and restaurants. There has been a trend to consolidate many off-trade sites, which are classified as “mom and pop” stores, as well as a trend toward expanding major chain stores. This consolidation of

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chain stores is also apparent in the rapid expansion of petrol stations, which are owned and operated by major international companies, such as Shell, BP and Statoil. Many of these petrol stations contain convenience stores, which sell all types of alcoholic beverages and in many areas serve as local convenience/liquor stores. The Company believes that it continues to be well-positioned to take advantage of both these trends in consumption and distribution.

Business Strategy

Expand Distribution Base. The Company plans to continue increasing its distribution capacity by expanding the number of its regional offices in Poland through the acquisition of existing wholesalers and expanding its own branch network, particularly in areas where the Company does not distribute directly or does not have a leading position in the region. The Company seeks to acquire successful wholesalers, which are primarily involved in the vodka distribution business and are among the leading wholesalers in their region. The Company would then add its higher margin imported brands to complement and enhance the existing product portfolio and margin of the acquired company. This strategy not only permits the Company to add geographic coverage and to increase its customer base, but also increases the Company’s leverage with its supply partners and its retail client base. The distribution base will also continue to increase through organic growth. The Company expects 7% to 8% organic sales growth in 2004. As a result of the successful implementation of this strategy over the last six years, the Company has increased its customer base from 7,500 in 1998 to approximately 31,000 in 2003.

In implementing this strategy, the Company completed its eighth, ninth and tenth acquisitions in 2003. On April 16, 2003, the Company acquired Dako Galant, which is located in the northwest of Poland. The Company acquired Panta Hurt, another distributor of alcoholic beverages, on September 5, 2003. The third acquisition occurred when the Company acquired Multi-Ex in November 2003. All three of the 2003 acquisitions continued to strengthen the Company’s position as the largest distributor of domestic vodka in Poland with a market share estimated by the Company of approximately 30%.

This strategy of acquiring dominant regional distributors in Poland has and is expected to continue to increase our buying and selling leverage in the market, as well as increase the amount of sales of the Company’s imported goods, which have higher margins, into distribution channels that were not previously serviced. The Company’s buying leverage with suppliers combined with its selling leverage to retail have and are expected to continue to contribute to improving its operating profit. The Company’s goal is to achieve approximately 40% market share in spirits over the next 12 to 18 months.

Increase Product Offerings. The Company’s strategy to attract new products to put through its next-day national distribution system is a key focus. Management focuses on products that fit its distribution model of higher value/margin products that would also add value to its current product mix. The Company is also interested in non-alcoholic products such as energy drinks and imported waters that remain growth opportunities in Poland.

Consolidation of Existing Offices/Warehouses. The Company is committed to consolidating the 58 satellite branches it currently operates in Poland. With ten acquisitions in the last five years, the Company believes it can consolidate certain smaller branches into larger branches without losing profitability. The Company estimates that it will consolidate approximately five to ten smaller branches into larger branches in 2004. It is expected that this consolidation would result in improved cash flow as inventory days are reduced and have minimal impact on the profit and loss as the Company expects to keep most of the sales revenue from the consolidation.

History

CEDC’s subsidiary Carey Agri was incorporated as a limited liability company in July 1990 in Poland. It was founded by William O. Carey, who died in early 1997, Jeffrey Peterson (who served as the Company’s Vice Chairman until February 2004) and William V. Carey, President and Chief Executive Officer of CEDC. In February 1991, Carey Agri was granted its first import beer license with which it started to import various beers, including Foster’s lager, Grolsch and products from Anheuser Busch, which it sold to wholesalers. With these beverages, Carey Agri sought to offer more products for which it had an exclusive import license and to market and to sell these products to the segment of the Polish population who were benefiting from the country’s market transformation. Because of Carey Agri’s initial success with Foster’s lager, for which it still holds the exclusive import license for Poland, it quickly diversified in 1992 by importing other quality brand beers from Europe and the United States. Sales during this period were typically in high volume consignments to other wholesalers.

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In 1993, with the acceleration of the opening of retail outlets in Poland, Carey Agri began to implement a direct delivery system in Warsaw, which could deliver alcoholic beverages to retail outlets on a reliable next-day basis. Carey Agri leased a warehouse, purchased trucks and hired and trained operational personnel and began to sell directly to convenience shops, small grocery stores and newly opened pubs. Because of this business experience, Carey Agri was prepared to take advantage of the opportunity to expand its import and delivery capacity in Warsaw when large foreign-owned supermarket chains began operations in 1993, creating a significant increase in the demand for the Company’s product line. The Warsaw model of desirable product lines and dependable prompt delivery of product was replicated by the Company in Krakow (1993), Wroclaw (1994), Szczecin (1994), Gdynia (1994), Katowice (1995), Torun (1995) and Poznan (1996).

CEDC was incorporated in Delaware in 1997. In July 1998, the Company issued 2,000,000 shares of its common stock in an initial public offering on the Nasdaq SmallCap Market raising net proceeds of approximately $10.6 million. In June 1999, the Company was accepted onto the Nasdaq National Market where it trades under the symbol “CEDC”.

The Company currently offers approximately 850 brands of beverages in five categories: (i) beers; (ii) spirits; (iii) wines; (iv) soft drinks and (v) cigars. The sales mix is outlined in the table below:

	2001		2002		2003
Imported beer	4.1	%	3.5	%	1.6	%
Imported spirits	3.0		2.5		1.5
Imported wines	3.5		3.2		3.2
Domestic Vodka	74.9		68.0		70.7
Domestic beer	1.2		8.0		10.2
Domestic spirits	7.2		6.5		4.9
Domestic wines	4.4		6.3		6.2
Other products	1.7		2.0		1.7
Total	100	%	100	%	100	%

Beer

The Company distributes imported beer through each of its regional offices. Budweiser Budvar, Guinness, Corona, Foster’s Lager, Kilkenny, Beck’s Pilsner, Bitburger, Franziskaner, Labatts Ice, Amsterdam, Kostrizer, Grolsch, Leffe, Hoegaarden and Stella Artois are distributed and marketed throughout Poland on an exclusive basis.

Most of the Company’s distribution contracts for beer contain a minimum purchase requirement and typically permit termination if the Company breaches its agreements, such as failure to pay within a certain time period or to properly store and transport the product. Trade credit is extended to the Company for a period of time after delivery of products. The duration of these agreements differ but typically range from one to three years with an automatic extension period unless one of the parties chooses to terminate the agreement. Under the conditions of these contracts, the Company is responsible for the marketing that is to be done within the confines of the market. The Company contributes up to 50% of the marketing budget for each brand depending upon the length of the contract.

In the last year, the Company has increased the amount of Polish beer that it distributes. This decision to increase its distribution of Polish beer resulted from the nature of the market place in a few select regions of Poland where the Company has enjoyed and continues to enjoy a strong competitive advantage. As a result of the requests from the Company’s client base in these areas and as a way of protecting market share, the Company offers Polish beer. The Company has no immediate plans to increase its distribution of Polish beer on a national scale, but it will increase its distribution of Polish beer in those strategic areas where the Company decides it is prudent.

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Polish Vodka

The Company purchases all of its domestic vodka products from 14 local distilleries and carries approximately 127 different brands. Some of the leading domestic vodka brands the company distributes include the following:

Wyborowa	Absolwent
Bols	Zubrówka
Luksusowa	Smirnoff
Belvedere	Soplica
Sobieski	Zoladkowa Gorzka

The Company’s agreements with various state-owned Polish vodka producers may be terminated by either party without cause with one months prior written notice. The contracts are generally for one year with an automatic extension clause, which has been standard practice within the industry for the past 11 years. To date, the Company has never had a distribution contract terminated by any of the local vodka producers. The Company has no obligation to perform any marketing activities with or on behalf of any local vodka producer.

In 2003, over 5% of the Company’s net sales resulted from sales of products purchased from the following companies: Polmos Bialystok (17%), Sobieski Distribution (14%), Unicom Bols Group (13%) and Polmos Zielona Gora (6%).

Imported Spirits

The Company distributes all its imported spirit products through each of its offices, mostly on a non-exclusive basis. Some of the better known spirit products sold by the Company include the following (the Company is the exclusive importer of the products denoted by an * below):

Scotch Whisky:	Johnnie Walker Black, Blue,	Dewars
	Gold and Red Labels	The Dimple
	Ballantines Finest	Chivas Regal
	Ballantines Gold Seal	Teacher’s Highland Cream
	Grants	Passport
Single Malt Whisky:	Cragganmore	Glenkinche
	Caol Ila	Glen Ord
Rum:	Bacardi Light and Black	Malibu
	Captain Morgan	Havanna Club
Bourbon:	Jack Daniel’s Tennessee Whiskey	Wild Turkey
	Jim Beam
Imported Vodkas:	Smirnoff Black	Absolut Range
	Finlandia Range
Tequila:	Jose Cuervo*	Sierra*
	Olmeca	Sauza
Gins:	Gordon’s London Dry	Beefeater
	Finsbury *	Bombay
Brandy:	Metaxa	Stock*
	Raynal*	Torres*
Cognacs:	Remy Martin	Camus *
	Hennessy	Courvoisier
	Martell	Otard

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Vermouths:	Stock Blanco, Rosa and	Cinzano Blanco, Rosso, Rose,
	Extra Dry* and Martini Bianco,	Extra Dry, Americano and Orancio
	Rosso, Rose, Extra Dry
Specialty Spirits:	Bailey’s Irish Cream	Carolan’s Irish Cream
	Kahlua Coffee Liqueur	Grand Marnier
	Bols Liquors / De Kuyper	Manderine Napoleon*
	Jagermeister	Sambuca*
	Whiskcream*	Cana Rio *
	Grappa*	Amaretto*
	Ouza*	Ecclisse*
	Sheridans	Campari

The products distributed on a non-exclusive basis are contracted for under substantially the same terms as those received from local vodka producers.

The contracts for distribution of the spirit brands the Company exclusively represents are generally one to three years in length and can be terminated with a minimum 90 days written notice by either party. The Company also shares in the local marketing costs up to a limit of 50% depending upon the length of the contract being served.

Wine

The Company represents approximately 55 wine suppliers and imports and distributes approximately 380 products through each of its offices on an exclusive basis. The wine importing company in the CEDC group is The Cellars of Fine Wines (“PWW”), which works directly with the suppliers listed below. Additionally, the Company distributes other various sparkling wines, vermouths and champagnes on a non-exclusive basis, including Moet & Chandon, Dom Perignon, Piper Heidseck, Martini and Cinzano.

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List of Exclusive Brands by Supplier

French Wines	Spanish Wines	Italian Wines
Veuve Clicquot Ponsardin	M. Torres	Castello Banfi
Krug	Jean Leon	Frescobaldi
B.Ph. de Rothschild	Bodegas Bebidas	Cecchi
Kressmann	Marques de Vittoria	Luce della Vite
Borie Manoux	Faustino	Marchesi di Barolo
Andre Lurton	Bodegas Victorianas	Villadoria
De Ladoucette	Codorniu	Santa Margherita
J. Moreau & Fils	Felix Solis	Bolla
Domaine Laroche		Coltiva
Georges Duboeuf
Faiveley
Leon Beyer
M. Chapoutier
Ogier
CFGV
Californian Wines	Chilean Wines	Australian Wines
Robert Mondavi	Concha y Toro	Penfolds
Trinchero Estates	Torres Chile	Seppelt
Marimar Torres
Sutter Home
Opus One
Francis Coppola
Other Wines	Champagnes	South African Wines
Lenz Mozer (Austrian)	Veuve Clicquot	Winecorp
Morhena (German)	Krug
Boutari (Greek)
Sogrape (Portugal)
Forrester (Portugal)

New Zealand Wines

Jackson Estate

The Company has been co-operating with the same suppliers for four years and has either verbal or written contracts. Where a written contract is in place, it is usually valid for between one and three years with a three to six month termination clause exercisable by either party. With selected contracts, the Company also shares in the local marketing costs on either a defined amount or revenue percentage basis. Where a label does not have sufficient demand, the Company will consolidate shipments abroad before receiving the goods into Poland where they are stored in the Company’s bonded warehouse until cleared by customs for sale.

Sales Organization

The Company employs approximately 310 salespeople who are assigned to one of its nine distribution centers and 58 satellite branches. Each distribution center and satellite branch has a sales manager, who meets with the salespeople on a twice weekly basis to review products and payments before the salespeople begin calling on customers. The sales force at each office is typically divided into two categories: traditional trade and key accounts. Salespeople work on a daily pre-order system, which is routed by region and take the sales force on approximately 20 calls per day. At the end of their day, they return to the office or telephone in their orders, which are processed and dispatched the next morning. The sales force work exclusively on a commission basis and are supplied with a company car and a mobile phone.

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Approved travel expenses are covered by the Company. The Company conducts periodic training to improve the salesmen’s knowledge of the Company’s products as well as improve the sales force’s skills.

Marketing

The Company has its own marketing department, which consists of ten people, including six brand managers, who manage the marketing support of the brands the Company imports exclusively into Poland. The Company manages a combined marketing budget for all exclusive brands of approximately $2 million, of which the Company contributes up to 50% of the total budget. The brand owners contribute the remaining part. The Company is responsible for all of the marketing efforts within Poland from point-of-sale production, below-the-line promotions, print work and public relation events, as well as overseeing the draft beer operations throughout Poland.

Distribution System

The Company’s headquarters are located in Warsaw, the capital of Poland. There are another eight distribution centers and 58 satellite branches spread across Poland.

In October 2000, the Company moved into a new distribution facility in Warsaw. The facility is approximately 9,765 square meters of warehouse (including bonded warehouse) and 2,230 square meters of office space currently used for the headquarters. Management believes the warehouse facility has enough space to permit the Company to expand for the next three to five years without any further major investment.

The Company has developed its own de-centralized, national, next-day distribution system for its alcoholic beverage products, and has the ability to leverage its distribution capacity to include other products that meet its product guidelines as regards to incremental gross margin and operating profit. For imported products, the distribution network begins with a central bonded warehouse in Warsaw. Products can remain in this warehouse without customs and other duties being paid until the product is needed for sale. At such point, the product is transferred to the Company’s consolidation warehouse at the same location and shipped directly to one of the eight regional office/warehouse facilities connected to each of the Company’s sales locations outside of Warsaw. Based on current sales projections, the regional distribution centers and satellite branches are provided with deliveries on a weekly or bi-weekly basis so that they are able to respond to their customers’ needs on a next-day basis. Because of the poor road infrastructure in Poland, the Company currently operates through nine distribution centers and 58 satellite branches. The Company expects to merge five to ten of the satellite branches during 2004, as there is current overlap with recently acquired companies.

For products the Company buys in Poland, the distribution chain begins with the importer/producer who ships product directly to each warehouse in Poland at the importer/producer’s cost. Once the product is entered into the branch inventory, it can be sold and delivered to customers within 24 hours.

Except at peak periods during the summer holidays and other peak times such as Christmas, all deliveries are made by Company-trained employees using Company-owned or leased vehicles. During busy periods, the Company uses independent contractors to supplement its own fleet. These contractors are usually small family-run businesses with which the Company has had relationships for several years. The Company has over 280 delivery trucks it uses for its direct deliveries in Poland. The Company replaces its fleet every three to five years, which is an ongoing process handled by its fleet management department.

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Market for Product Line

In 2003, approximately 94% of the Company’s total sales were through off-trade locations (including 12% through other wholesalers), where the alcoholic beverages are not consumed, and 6% through on-trade locations, where the alcoholic beverages are consumed. A breakdown by value of the off-trade and on-trade is provided below.

Off-trade Locations
Supermarket and locally-owned shops	64	%
Wholesalers	12
Hypermarkets	10
Gas Stations	8
On-trade Locations	6
Total	100	%

Off-Trade Market

There are two components of the Company’s sales to locations where alcoholic beverages are not consumed on premises. The most significant are small, usually Polish-owned and managed businesses, including small grocery stores. At December 31, 2003, the Company sold products to approximately 19,840 such business outlets, which typically stock and sell relatively few alcoholic beverage products and wish to have access to the most popular selling brands. The other components of the off-trade business are large supermarket chains, which are typically non-Polish-owned, as well as smaller multi-store retail outlets operated by major Western energy companies in connection with the sale of gasoline products. The large supermarket chains typically offer a wide selection of alcohol products, while the smaller retail outlets offer a more limited selection.

The Company also sells products throughout Poland through other wholesalers. There are a few written agreements with these wholesalers as this distribution channel is going through a major consolidation and the Company’s strategy is to go direct to retail bypassing this distribution channel.

On-Trade Market

There are three components to the Company’s sales to locations where alcoholic beverages are consumed: (i) bars and nightclubs; (ii) hotels and (iii) restaurants. Bars and nightclubs are usually locally managed businesses, although they may be owned and operated in major cities by a non-Polish national. Hotels include worldwide chains such as Marriott, Sheraton, Holiday Inn, Hyatt and Radisson, as well as the major Polish chain, Orbis. Restaurants are typically up-scale and located in major urban areas.

Financial Information about Geographic Access

During each of the last three years, all of the Company’s revenue has been derived from customers in Poland, where all of the Company’s customers are located, and all of the Company’s long-lived assets are located in Poland.

Control of Bad Debts

The Company believes that its close monitoring of customer accounts both at the relevant regional office and from Warsaw has contributed to its success in maintaining a low ratio of bad debts to net sales. During 2001, 2002 and 2003, bad debt expense as a percentage of net sales, were approximately 0.39%, 0.49% and 0.14% of net sales. Management believes the ongoing enhancement of computer systems for interoffice financial and administrative controls will assist in maintaining a low ratio of bad debts to net sales as the Company continues to expand. A more detailed explanation of the bad debts provision is available in “Management’s Discussion and Analysis and Financial Condition and Results of Operation.”

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Competition

The Company, as an early entrant in the post-Communist market in Poland, has over 11 years of experience in introducing, developing and refining sales, marketing and customer service practices in the diverse and rapidly developing Polish economy. The Company believes this experience gives it a competitive advantage in the alcoholic beverage distribution business. The Company believes that it is currently the only independent national distributor of an extensive and diversified alcoholic beverage line in Poland.

The Company competes with various regional distributors in all of its distribution centers and satellite branches. This competition is particularly vigorous with respect to domestic vodka brands. One of the largest, foreign-owned chain stores also sells to smaller retailers. The Company addresses this regional competition, in part, through offering to customers in the region a single source supply of more products than its regional competitors typically offer and the Company is able to leverage its market share to be price competitive while still maintaining its margins.

The brands of beers, wines and spirits distributed by the Company compete with other brands in each category, including some the Company itself distributes. The Company expects to see increased competition from Heineken, SAB and Carlsberg in the import beer sector while the Company believes that the import wine and import spirit categories will remain less competitive.

Employees

The Company had approximately 1,905 full-time employees as of December 31, 2003. Substantially all employees were employed in Poland and have agreements with the Company. The Polish Labor Code requires that certain benefits be provided to employees, such as the length of vacation time and maternity leave and a bonus paid upon retirement based upon years worked in the firm. This law also restricts the discretion of the Company’s management to terminate employees without cause and requires in most instances a severance payment of one to three months’ salary. The Company makes required monthly payments up to 19.83% of an employee’s salary to the governmental health and pension system. The Company’s employees are not unionized. The Company believes that its relations with its employees are good. The Company also grants other health benefits to selected key management personnel.

Regulation

The Company’s business of importing and distributing alcoholic beverages is subject to extensive regulation. The Company believes it is operating with all licenses and permits material to its business. The Company is not subject to any proceedings calling into question its operation in compliance with any licensing and permit requirements.

Import of Products

Import License

Import permits must be obtained for specific consignments of alcoholic beverages to be imported under the import license, as well as under customs quotas. See “— Customs Duties and Quotas.” The Company must obtain such permits for all its imported alcoholic beverages except for beer and wine. The application for a permit is usually made when products are ordered and must specify the customs code of the group of products, the quantity of products and the source country of the products. Permits are issued for four months, and the Company must demonstrate to appropriate officials that each consignment it imports is covered by a permit. Similar permits must be obtained for the importation of cigars.

Approval of Health Authorities

Local health authorities at the place of import must also be notified of all consumption goods being imported into Poland. This notification is typically given when a particular shipment of products arrives in Poland. In general, this notice permits the applicable health authorities to determine that no product is entering the Polish market without having been previously approved for sale in Poland. See “— Wholesale Activities — General Norms.”

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Wholesale Activities

The Company must have additional permits from the Minister of Economy and appropriate health authorities to operate its wholesale distribution business. Furthermore, it must comply with rules of general applicability with regard to packaging, labeling and transporting products.

General Permits

The Company is required to have permits for the wholesale trade for three of its product lines — beer, wine and spirits. The permit with regard to beer is issued for two years and the current permit will expire on March 28, 2005. The permit with regard to spirits is issued for one year and the current permit will expire on December 31, 2004. The permit for wine is issued for two years and the current permit will expire on March 28, 2005. One of the conditions of these permits is that the Company sells its products only to those who have appropriate permits to resell the products. A permit can be revoked or not renewed if the Company fails to observe laws applicable to its business as an alcohol wholesaler, fails to follow the requirements of a permit or if it introduces into the Polish market alcohol products that have not been approved for trade. The Company also obtained separate permits for each of its subsidiaries. The Company has never been denied any general permits and expects to receive these permits in due course.

Health Requirements

The Company must obtain the approval of the local health authorities to open and operate its warehouses. This approval is the basis for obtaining the permit for wholesale activities. The health authorities are primarily concerned with sanitation and proper storage of alcoholic beverages, as well as cigars. These authorities can monitor the Company’s compliance with health regulations. Similar regulations apply to the transport of alcoholic beverages and cigars, and the drivers of such transports must themselves submit health records to the appropriate authorities.

General Norms

The Company must comply with a set of rules, usually referred to generally as “Polish Norms,” which constitute legal regulations concerning, as applicable to the Company, standards according to which alcoholic beverages and cigars are packaged, stored, labeled and transported. These norms are established by the Polish Normalization Committee. In the case of alcoholic beverages, the committee is composed of academics working with relevant government ministries and agencies as well as experienced businessmen working in the alcoholic beverage industry. The Company received a certificate after an inspection by the Central Standardization Institute, which is part of the Ministry of Agriculture, indicating its compliance with applicable norms as of the date thereof. Such certification is needed to import alcoholic beverages. Compliance with these norms is also confirmed by health authorities when particular shipments of alcoholic beverages arrive in Poland. The Company is in compliance with the statutes of the Polish norms outlined above. See “— Import of Products — Approval of Health Authorities.”

Customs Warehouse

Since the Company operates a customs warehouse, further regulations apply, and a permit from the Director of the Regional Customs Office and the approval of health authorities were required to open and operate the customs warehouse. The applicable health concerns are the same as those discussed under “Wholesale Activities” with regard to non-custom warehouses. The Company received its most current permit on December 28, 1998, which is for an unspecified period of time. The continued effectiveness of the permit is conditioned on the Company’s complying with the requirements of the permit which are, in general, the proper payment of customs duties and maintenance of an insurance policy.

Customs Duties and Quotas

As a general rule, the import of alcoholic beverages and cigars into Poland is subject to customs duties and the rates of the duties are set by the Polish government acting through the Council of Ministers for particular types of products. In the Company’s case, the duties vary by product lines. Currently, the customs duty for beer is 6% for beer produced within the European Community, 30% for beer produced outside of the European Community and 21% for beer produced within CEFTA (Central European Fair Trade Agreement) countries. The current customs duty for wine is 20% for wine produced within the European Community, 30% for wine produced outside the European Community and 15% for wine produced within CEFTA countries. For imported spirits, the customs duties range from 75% to 105% irrespective of country of origin. However, as Poland is scheduled to join the European Union (EU) as of May 1,

13

2004, the customs duties are scheduled to go to zero at that time for all EU-sourced products whereas for all products sourced outside the EU, duties will either go to zero or will be substantially reduced to be in line with existing signed agreements between the EU and the countries from which products are sourced.

Customs quotas for alcoholic beverages, as well as for cigars, are fixed annually, with the current quotas being applicable through December 31, 2004. There are no public guidelines on how the Minister of Economy has determined the current quotas or may determine future quotas. However, since January 2002, there have been no customs quotas for alcoholic beverages and cigars produced within the European Community, which represents approximately 80% of the Company’s import business, other than special quotas which have been granted for a limited number of EU-sourced spirits and wine, which have had previous tariffs reduced by 20%.

To import alcoholic beverages and cigars under the quotas, as well as outside the quotas, the Company must receive a permit, which is generally valid for four months and specifies what products and of what quality may be imported from what country or group of countries. It is the Company’s practice to apply for this import permit after concluding a contract for the import of a particular group of products. The Company has always received the import permits for which it has applied, although there can be no assurance that it will continue to do so in the future.

Advertising Ban

In 2001, the government introduced significant changes to the Alcohol Awareness Law by separating regulations concerning beer from regulations concerning other alcoholic beverages. Previously, the government had implemented a ban on advertising on all alcoholic beverages.

According to the new regulations, above-the-line activities for beer are allowed but are limited to the following: billboard advertising only if 20% of the surface of the billboard is dedicated to health warnings concerning alcohol consumption, advertising in the press is limited to the inside of a publication (no front or back cover advertising is allowed), television advertising is only allowed between the hours of 8:00 p.m. and 6:00 a.m. and no advertising can be associated with sexual attractiveness, relaxation, health, sport or incorporate children in any way in the advertisement. No other above-the-line activities for other alcoholic beverages are allowed at all.

The government regulations for below-the-line promotions remain the same as in previous years for all alcoholic beverages. The government allows direct mail campaigns, promotions such as game contests, the packaging of gifts with an alcoholic beverage (i.e., a free glass is attached to a bottle of spirits) and other similar promotions. However, incentive promotions have to be conducted within the alcohol section of each store. In the on-premise outlets, below-the-line activities are allowed by the government.

The Company strictly adheres to the government regulations regarding above-the-line and below-the-line advertising and promotion. To date, the Company has not been in violation of these regulations.

Regulation of Retail Sales

The Company operates four retail outlets for alcoholic beverages under the name “Fine Wine and Spirits”. Under Polish law, each of these outlets must have a retail permit to sell alcoholic beverages to potential clients. The length of such permits varies from one to three years and is renewable. Also, each new store needs to acquire a certificate from the local health authorities to sell its products. The Company, to obtain the above permits, must first have a lease agreement with the owner of the building. Furthermore, for each lease agreement, the Company requires a long term notice period in order to safeguard its investments. All present retail outlets operate with valid retail licenses, which can be renewed at the expiration date.

Available Information

The Company maintains an Internet website at http://www.ced-c.com. Please note that our Internet address is included in this annual report as an inactive textual reference only. The information contained on our website is not incorporated by reference into this annual report and should not be considered part of this report.

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports and most of our other SEC filings available free of charge through our Internet website as soon as reasonably practicable after we electronically file these materials with

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the SEC. These filings are also available to the public over the Internet at the SEC’s website at http://www.sec.gov. In addition, we provide paper copies of our SEC filings free of charge upon request.

We have adopted a Code of Ethics applicable to all of our officers, directors and employees, including our Chief Executive Officer and Chief Financial Officer (who is also our Principal Accounting Officer). The Code of Ethics is publicly available on our website at http://www.ced-c.com. We intend to disclose any amendment to, or waiver from, any provision in our Code of Ethics that applies to our Chief Executive Officer and Chief Financial Officer by posting such information on our website at http://www.ced-c.com.

Risks Factors

The inability to adequately manage exchange-rate risk could affect our financial results and management’s ability to make financial projections.

The Company’s operations are conducted primarily in Poland. Our functional currency is the Polish zloty while our reporting currency is the U.S. dollar. The Company’s financial instruments consist mainly of cash and cash equivalents, accounts payable and receivable, inventories, bank loans, overdraft facilities and long-term debt. All of the monetary assets represented by these financial instruments are located in Poland; consequently, they are subject to currency translation risk when reporting in U.S. dollars.

If the U.S. dollar increases in value against the Polish zloty, the value in U.S. dollars of assets, liabilities, revenues and expenses originally recorded in the Polish zloty will decrease. Conversely, if the U.S. dollar decreases in value against the Polish zloty, the value in U.S. dollars of assets, liabilities, revenues and expenses originally recorded in Polish zloty will increase. Thus, increases and decreases in the value of the U.S. dollar can have an impact on the value in U.S. dollars of our non-U.S. dollar assets, liabilities, revenues and expenses, even if the value of these items has not changed in their original currency.

The following table sets forth, for the periods indicated, the average exchange rate (expressed in current zloty) quoted by the National Bank of Poland. Such rates are set forth as zloty per U.S. dollar. At March 11, 2004, the rate was PLN 3.91 = $1.00.

	Year ended December 31,
	2000	2001	2002	2003
Exchange rate at end of period	4.15	3.99	3.84	3.74
Average exchange rate during period (1)	4.30	4.08	4.02	3.89
Highest exchange rate during period	4.71	4.50	4.26	4.09
Lowest exchange rate during period	4.04	3.94	3.84	3.67

(1) The average of the exchange rates on the last day of each quarter during the applicable period.

The inability to maintain and expand our senior management would threaten our ability to implement all of our business strategies.

The management of future growth will require the ability to retain qualified management personnel and to attract and train new personnel. Senior leadership is necessary to develop the financial and cost controls, information systems and marketing activities needed for us to prosper. Further, the successful integration of acquired companies requires substantial attention from our senior management team. Failure to successfully retain and hire needed personnel to manage our growth and development would have a material adverse effect on our ability to implement our business plan and grow our business.

A significant number of our largely short-term and non-exclusive supply contracts may be unexpectedly terminated, which would materially and adversely affect our ability to generate revenue and operating profits.

We distribute approximately 93% of the alcoholic beverages in our portfolio on a non-exclusive basis. Furthermore, most of our distribution agreements for these beverages have a term of approximately one year, although several of such agreements can be terminated by one party without cause on relatively short notice. For example, the distribution agreements with respect to domestic vodka (which accounted for approximately 71% of our net sales in 2003) can be terminated on one month notice. Any termination of a significant number of our supply contracts would

15

adversely affect our ability to generate revenue and operating profits.

In 2003, we purchased over 5% of net sales from the following suppliers: Polmos Bialystok (17%), Sobieski Distribution (14%), Unicom Bols Group (13%) and Polmos Zielona Gora (6%). We have one-year supply contracts with each of these companies. The termination of our relationship with any of these entities could have a material adverse effect on our revenue and operating profits.

Risks Related to Growth Through Acquisitions

The failure to smoothly integrate the operations, management and other personnel of acquired companies could adversely affect our ability to maximize our business activities and financial performance.

Our growth will depend in part on our ability to acquire additional distribution capacity and effectively integrate these acquisitions into our existing operations and systems of management and financial controls. Risks associated with acquisitions include, but are not limited to, integration of sales personnel, retention of key management, standardization of management and controls, harmonization of sales and marketing strategies and procedures and implementation of group financial reports and controls. We may not be able to successfully integrate the operations of any acquisition, which could negatively impact our financial performance.

Furthermore, since we have a history of maintaining the operational independence of the companies we acquire, there are risks that our managers of our subsidiaries, who were once the owners of their own companies, will not successfully implement new business strategies and management and cost-control systems. Our senior management team residing in Warsaw may not be able to coordinate the business activities of the group’s various subsidiaries in order to maximize the group’s business potential as a nationwide distribution network.

The absence of suitable acquisition targets would undermine our continuing acquisition strategy.

We may not identify suitable acquisition candidates that are available on terms acceptable to us. In addition, acquired businesses may not be profitable at the time of their acquisition and may not achieve or maintain profitability levels that justify our investment. Therefore, our acquisitions may not be accretive to shareholder value.

The implementation of anti-monopoly regulations could threaten our basic business strategy of growing through acquisitions once the company reaches approximately a 35% to 40% market share.

Under the Polish Anti-Monopoly Act, acquisitions may be blocked or have conditions imposed upon them by the Polish Office for Protection of Competition and Consumers (the “Anti-Monopoly Office”) if the Anti-Monopoly Office determines that the acquisition has a negative impact on the competitiveness of the Polish market. The current body of Polish anti-monopoly law is not well established and, therefore, it can be difficult to predict how the Anti-Monopoly Office will act on an application. Generally, companies that obtain control of 40% or more of their market may face greater scrutiny from the Anti-Monopoly Office than those that control a lesser share. Additionally, several types of reorganizations, mergers and acquisitions and undertakings between business entities, including acquisitions of stock, under circumstances specified in the Anti-Monopoly Act, require prior notification to the Anti-Monopoly Office. Sanctions for failure to notify include fines imposed on parties to the transaction and members of their governing bodies. The Anti-Monopoly Office may not approve any or all of our proposed acquisitions, which action would negatively impact our ability to institute our business plan and grow our business.

Risks Related to Investments in Poland and Emerging Markets

Increased Polish regulations of the alcoholic beverage industry could make it difficult for us to operate in the industry profitably.

The importation and distribution of alcoholic beverages in Poland are subject to extensive regulation, requiring us to receive and renew various permits and licenses to import, warehouse, transport and sell alcoholic beverages. These permits and licenses often contain conditions with which we must comply in order to maintain the validity of such permits and licenses. Our import and sale of cigars are also subject to regulation. These various governmental regulations applicable to the alcoholic beverage industry may be changed so as to impose more stringent requirements on us. If we were to fail to be in compliance with applicable governmental regulations or the conditions of the licenses and permits we receive, such failure could cause our licenses and permits to be revoked and have a material adverse effect on our business, results of operations and financial condition. Further, the applicable Polish

16

governmental authorities, in particular the Minister of Economy, have articulated only general standards for issuance, renewal and termination of the licenses and permits which we need to operate and, therefore, such governmental authorities retain considerable discretionary authority in making such decisions.

Deterioration in the market reforms undertaken by the Polish government could make it more difficult for management to operate our company and predict financial performance.

Poland has undergone significant political and economic change since 1989. Political, economic, social and similar developments in Poland could in the future have a material adverse effect on our business and operations. In particular, changes in laws or regulations (or in the interpretations of existing laws or regulations), whether caused by changes in the government of Poland or otherwise, could materially adversely affect our business and operations. Currently, there are no limitations on the repatriation of profits from Poland, for example, but there is no assurance that foreign exchange control restrictions or similar limitations will not be imposed in the future with regard to repatriation of earnings and investments from Poland. If such exchange control restrictions, or similar limitations are imposed, the ability of CEDC to receive dividends or other payments from its subsidiaries could be reduced, which would reduce our ability to pay dividends.

Emerging economies, such as Poland in which we operate, can be more volatile and perform differently than the United States due to increased risks of adverse political, regulatory or economic developments. The value of our common stock may be adversely affected by developments that would not affect other U.S. issuers without substantial operations in emerging markets.

In general, investing in the securities of issuers with substantial operations in foreign markets such as Poland involves a higher degree of risk than investing in the securities of issuers with substantial operations in the United States and similar jurisdictions. The Polish market could be subject to greater social, economic, regulatory and political uncertainties than the United States which could have an adverse effect on the market value and liquidity of our common stock.

Our stockholders could experience unusual expense and uncertainty in trying to enforce any judicial judgment against us.

We are organized under the laws of Delaware. Therefore, our stockholders are able to affect service of process in the United States upon CEDC and may be able to affect service of process upon our directors. However, we are a holding company, all of the operating assets of which are located outside the United States. As a result, it may not be possible for investors to enforce against our assets judgments of United States courts predicated upon the civil liability provisions of United States laws. We have been advised by our counsel that there is doubt as to the enforceability in Poland, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon the laws of the United States. In addition, awards of punitive damages in actions brought in the United States or elsewhere may not be enforceable in Poland.

Item 2. Properties.

Customs and Consolidation Warehouse

The Customs and Consolidation Warehouse is a 9,765 square meter leased facility located in Warsaw. The lease is for seven years commencing May 1, 2003 and the monthly rental, denominated in U.S. dollars, is approximately $54,930 per month as of December 31, 2003.

Sales Offices and Warehouses

The Company has entered into leases for its Warsaw headquarters and most of its eight other distribution centers and 58 regional branches. The amount of office and warehouse space leased for each distribution center and satellite branch varies between 500 and 2,000 square meters depending on the size of the business. The monthly lease payments, which are denominated in Polish zloty, vary between $1,500 and $5,000 for the regional distribution centers and satellite branches and are approximately $96,000 per month in Warsaw ($54,930 for the customs and consolidation warehouse and $41,070 for the office space for Company headquarters). The Warsaw lease is for seven years, commencing May 1, 2003, without termination; most of the other leases can be terminated by either party on approximately three months’ prior notice.

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Retail Outlets

The Company has entered into a long term or indefinite term lease agreement for each of its five retail outlets. All the lease agreements can be terminated by mutual consent or by three to six months’ prior notice by either party. The lessor, however, has, in each case, waived its right to terminate the agreement for three years as long as we are performing our obligations thereunder. Lease payments, which are denominated in Polish zloty, currently range from $1,300 to $2,388 per month.

Item 3. Legal Proceedings.

The Company is involved in litigation from time to time in the ordinary course of business. In management’s opinion, such litigation, individually and in the aggregate, is not material to the Company’s financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2003.

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

Market Information

The Company’s Common Stock has been traded on the NASDAQ National Market (the “National Market”) under the symbol “CEDC” since June 1999. Prior thereto it traded on the NASDAQ Small Cap Market since our initial public offering in July 1998. The following table sets forth the high and low bid prices for the Common Stock, as reported on the NASDAQ National Market, for each of the Company’s fiscal quarters in 2002 and 2003. These prices represent inter-dealer quotations, which do not include retail mark-ups, mark-downs or commissions and do not necessarily represent actual transactions. The prices for 2002 have also been adjusted to reflect the impact of the Stock split in May 2003.

	High		Low
2002
First Quarter	$	9.73	$	6.34
Second Quarter		12.95		6.34
Third Quarter		12.95		5.33
Fourth Quarter		13.49		5.33
2003
First Quarter	$	20.47	$	12.20
Second Quarter		24.90		12.58
Third Quarter		27.85		17.67
Fourth Quarter		41.84		26.40

On March 11, 2004, the last reported sales price of the Common Stock was $33.70 per share.

Holders

As of March 11, 2004, there were approximately 4,200 beneficial owners and 62 shareholders of record of Common Stock.

Dividends

CEDC has never declared or paid any dividends on its capital stock. Future dividends will be subject to approval by CEDC’s board of directors and will depend upon, among other things, the results of the Company’s operations, capital requirements, surplus, general financial condition and contractual restrictions and such other factors as the board of directors may deem relevant.

The Company has instituted a policy of having all of its subsidiaries (except Carey Agri) pay dividends to their respective shareholders, either the Company or Carey Agri. The subsidiaries, except for Carey Agri, will distribute 50% of their respective current year after tax profits. Retained earnings prior to January 1, 2001 are not considered distributable. As at December 31, 2003, the Company’s subsidiaries will provide for dividends of approximately $5,395,500 to Carey Agri and the Company. Based upon on the Company’s shareholdings, CEDC will receive $925,900 and Carey Agri $4,469,600.

Theses dividends are being used initially to pay down acquisition debt and to fund the day-to-day operations of the CEDC holding company. At December 31, 2003, the subsidiaries had approximately $31.8 million of retained earnings of which $6.3 million is currently non-distributable.

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As CEDC is a holding company with no business operations of its own, its ability to pay dividends will be dependent upon either cash flows and/or earnings of its subsidiaries and the payment of funds by those subsidiaries to CEDC. As Polish limited liability companies, the subsidiaries are permitted to declare dividends only twice a year from their retained earnings, computed under Polish Accounting Regulations after the audited financial statements for that year have been provided to and approved by shareholders.

Sales of Unregistered Common Stock in 2003

On March 31, 2003, the Company completed a private placement of 750,000 shares of common stock and additional investment rights to purchase up to an additional 150,000 shares of common stock at a purchase price of $23.25 per share to five institutional accredited investors for gross proceeds of $17,437,500. All of the additional investment rights were exercised during 2003 for additional gross proceeds of $3,487,500. The principal underwriter was Banc of America Securities LLC, which was paid a commission of 6%. The private placement was made to institutional accredited investors in reliance on the exemption from registration provided by Regulation D under the Securities Act of 1933.

On April 1, 2003, the Company issued 25,083 shares of common stock valued at $417,760 to acquire the remaining 3.25% of the voting shares of Onufry S.A which had been completed in October 2002. On April 10, 2003, the Company issued 23,000 shares of common stock valued at $344,200 as part of its earn-out agreement for Astor Sp. z. o.o. which had been initiated in 2001. On May 15, 2003, the Company issued 10,853 shares of common stock valued at $233,094 in connection with its acquisition Dako-Galant S.A. and on December 12, 2003 an additional 9,228 shares of common stock valued at $266,800 were issued as final consideration once certain criteria had been met. On October 3, 2003, the Company issued 29,367 shares of common stock valued at $861,300 as partial consideration for the 100% voting rights of Panta Hurt. On November 24, 2003, the Company issued 25,000 shares of common stock valued at $741,700 as part consideration for acquiring the 100% voting rights to Multi-Ex S.A. These shares were issued pursuant to the exemption from registration provided by Regulation S under the Securities Act. The securities were issued in off-shore private placements in reliance on Regulation S to entities which are not “United States persons” as defined by Regulation S. The stock certificates for all such securities bear a legend indicating that the stock is restricted and may not be sold in the United States without registration or an exemption from such requirements. Further, the holders have agreed to a six-month lock-up period.

Equity Compensation Plans

The following table provided information with respect to our equity compensation plans as of December 31, 2003.

Equity Compensation Plan Information
	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Plan Category	(a)	(b)	(c)
Equity Compensation Plans Approved by Security Holders	724,650	$22.18	1,203,725
Equity Compensation Plans Not Approved by Security Holders	—	—	—
Total	724,650	$22.18	1,203,725

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Item 6. Selected Financial Data.

The following table sets forth selected consolidated financial data for the periods indicated and should be read in conjunction with and is qualified by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” the consolidated financial statements, the notes thereto and the other financial data contained in Items 7 and 8 of this report on Form 10-K.

Income Statement Data:	Year ended December 31,
	1999			2000			2001			2002			2003
	(in thousands, except for per share amounts)
Net sales	$	90,240		$	131,233		$	178,236		$	293,965		$	429,118
Cost of goods sold		77,471			113,687			154,622			255,078			372,638
Gross profit		12,769			17,546			23,614			38,887			56,480
Sales, general and administrative expenses		9,537			14,698			18,759			26,273			34,313
Operating income		3,232			2,848			4,855			12,614			22,167
Non-Operating income / (expense)
Interest expense		(374	)		(955	)		(1,345	)		(1,586	)		(1,633	)
Interest income		378			261			77			99			133
Realized and unrealized foreign currency transaction losses, net		(215	)		(494	)		(12	)		(176	)		(92	)
Other income / (expense), net		(13	)		(172	)		83			113			(59	)
Income before income taxes		3,008			1,488			3,658			11,064			20,516
Income taxes		(1,106	)		(503	)		(1,132	)		(2,764	)		(5,441	)
Net income	$	1,902		$	985		$	2,526		$	8,300		$	15,075
Net income per common share, basic	$	0.31		$	0.15		$	0.39		$	1.03		$	1.48
Net income per common share, diluted	$	0.31		$	0.15		$	0.38		$	0.99		$	1.44
Average number of outstanding shares of common stock		6,075			6,501			6,671			8,357			10,498
Balance Sheet Data:	December 31,
	1999			2000			2001			2002			2003
	(in thousands)
Cash and cash equivalents	$	3,115		$	2,428		$	2,466		$	2,237		$	6,229
Working capital		9,608			9,362			6,883			14,373			35,016
Total assets		38,966			59,311			68,977			130,800			187,470
Long-term debt and capital lease obligations, less current portion		3,622			7,988			3,495			6,623			497
Shareholders’ equity		14,613			16,492			20,756			41,381			83,054

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The following analysis should be read in conjunction with the Consolidated Financial Statements and the notes thereto appearing elsewhere in this report.

Overview

The following comments regarding variations in operating results should be read considering the rates of inflation in Poland during the periods presented — 2001 (3.6%), 2002 (1.1%) and 2003 (1.7%) — as well as the fluctuations of the Polish zloty compared to the U.S. Dollar. Using exchanges rates as at December 31, 2002 and 2003, the zloty in comparison to the U.S. Dollar appreciated by 2.6% in 2003 and 3.7% in 2002.

In order to aid understanding, we have prepared tables which segment the income statement information as presented in the financial statements into those elements of the income statement which relate to operations acquired by the Company during the reporting period and those which relate to operations owned in both reporting periods. Key definitions are:

Total Operations 2003: This is the extract from the income statement for total operations for the fiscal year ended December 31, 2003.

Operations Acquired 2003: This is the elimination from total operations 2003 of activities acquired in 2003.

Operations Acquired 2002: These are the eliminations of the amounts generated in 2003 by subsidiaries acquired in 2002 for the corresponding pre-acquisition period of 2003 so as to present continuing operations 2003 based on comparable operations. For example, if we acquired a subsidiary on May 1, 2002, operations acquired 2002 includes the amounts generated by that subsidiary during the period January 1, 2003 to April 30, 2003 which represents the corresponding pre-acquisition period.

Continuing Operations 2003: The amounts for 2003 generated by the same subsidiaries owned in 2002 and for the same corresponding period.

Total Operations 2002: This is the extract from the income statement for total operations for the fiscal year ended December 31, 2002.

Readers will also find frequent references to the term cash on delivery (“COD”). Normal trade terms from our Polish vodka suppliers are 60 days; however, we are offered by some of these suppliers significant discounts if we pay for goods when delivered. The discounts offered are considerably in excess of the effective rate we would pay for 60-day term borrowings under our bank facilities. We will later refer to COD in discussions regarding margin growth and short-term banking facilities.

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Results of Operations

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Year Ended December 31,	Total Operations 2003		Operations Acquired 2003		Operations Acquired 2002		Continuing Operations 2003		Total Operations 2002
	(in thousands, except percentages)
Net Sales	429,118		45,586		55,393		328,139		293,965
Cost of goods sold, including excise taxes	372,638		39,379		49,196		284,063		255,078
Gross Profit	56,480		6,207		6,197		44,076		38,887
	13.2	%	13.6	%	11.2	%	13.4	%	13.2	%
Selling, general and administrative expenses	31,594		3,057		3,876		24,661		23,367
Depreciation of equipment	1,672		162		164		1,346		1,273
Amortization of trade marks	455		—		—		455		202
Bad debt expense	592		(47	)	29		610		1,431
Operating income	22,167		3,035		2,128		17,004		12,614
	5.2	%	6.7	%	3.8	%	5.2	%	4.3	%
Non operating income / (expenses)
Interest income	133		13		10		110		99
Interest expense	(1,633	)	(147	)	(171	)	(1,315	)	(1,586	)
Realized and unrealized foreign exchange losses	(92	)	—		—		(92	)	(178	)
Other income / (expense), net	(59	)	(19	)	90		(130	)	115
Income before taxes	20,516		2,882		2,057		15,577		11,064
	4.8	%	6.3	%	3.7	%	4.7	%	3.8	%
Income tax expense	5,441		212		641		4,588		2,764
Net income	15,075		2,670		1,416		10,989		8,300
	3.5	%	5.9	%	2.6	%	3.3	%	2.8	%

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Net Sales

Total net sales for 2003 increased by 46.0%, or $135.1 million, to $429.1 million. Net sales from continuing operations increased 11.6%, or $34.2 million, to $328.2 million for 2003 from a base figure of $294.0 million for 2002. The increase in net sales from continuing operations was mainly due to two factors:

• increased sales productivity — through the use of improved sales management skills, we were able to increase the net sales achieved per salesman; and

• sales coverage — we were able to increase the number of accounts served.

Gross Profit

Total gross profit on net sales increased by 45.2%, or $17.6 million, to $56.5 million in 2003. The growth in gross profit from continuing operations was 13.3%. As a percentage of net sales, total gross margins for 2003 and 2002 was 13.2%. The gross margins attributable to net sales from continuing operations increased from 13.2% to 13.4%. The increases in core gross margins can be attributed to the improved product mix being achieved in subsidiaries following operational reviews and implementation of marketing and sales coverage strategies.

Operating Expenses

Total selling, general and administrative (S,G&A) expenses increased 35.2% from $23.4 million in 2002 to $31.6 million in 2003. S,G&A attributable to continuing operations increased by 5.5% to $24.7 million. As a percentage of total net sales, total S,G&A was 7.4% for 2003, down from 7.9% for 2002. For S,G&A attributable to continuing operations for 2003, it was 7.5% of net sales.

Depreciation of equipment in total increased by 31.2% from $1,273,200 in 2002 to $1,671,800 in 2003. The increase is attributable to the Company’s investment in its logistics infrastructure (delivery vehicles and warehouse and IT facilities).

Bad debt expense in total decreased 58.6% from $1,431,000 in 2002 to $592,000 for 2003. This decrease has been achieved through consistent management of the age profile of our trade receivables and diligent review of acquisitions to ensure that all provisions are made as part of the fair value assessment. As a percentage of sales, the provision represents 0.1% for 2003 versus 0.5% for 2002.

Operating Income

Total operating income increased 75.7%, or $9.6 million, to $22.2 million for 2003. Expressed as a percentage of net sales, operating profit for 2003 was 5.2% as opposed to 4.3% for 2002. Operating income attributable to continuing operations increased 34.8%, or $4.4 million, to $17.0 million. The reasons for the increase of operating margins were due to the factors stated above.

Interest Expense

Total interest expense remained stable at $1.6 million for both 2002 and 2003. Interest cover increased from 7.9 times in 2002 to 13.6 times in 2003. Interest cover is the number of times that interest expense divides into operating profit.

Net Realized and Unrealized Foreign Currency Losses

The net charge relating to foreign exchange losses decreased to $92,000 for 2003 versus a net charge of $178,000 for 2002. Following the Company’s decision in November 2002 to convert all its loan obligations to Polish

24

zloty, its functional currency, the Company has only been exposed to foreign currency translation risk on its net working capital.

Income Tax

The total tax charge for 2003 was $5.4 million, which represented 26.5% of pre-tax profits. For 2002, the charge was $2.8 million, which represented 25.0% of pre-tax profits. The 2003 tax charge was impacted by a write down of the deferred tax asset resulting from a reduction in the basic corporate income tax rate enacted in Poland from 27% down to 19%. This is a one off event and more details are available in note 4 to the financial statements.

Net Income

Total net income increased by 81.6%, or $6.8 million, to $15.1 million for 2003. The increase was due to the factors noted above.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

In order to aid understanding, we have prepared tables which segment the income statement information as presented in the financial statements into those elements of the income statement which relate to operations acquired by the Company during the reporting period and those which relate to operations owned in both reporting periods. Key definitions are:

Total Operations 2002: This is the extract from the income statement for total operations for the fiscal year ended December 31, 2002.

Operations Acquired 2002: This is the elimination from total operations 2002 of activities acquired in 2002.

Operations Acquired 2001: These are the eliminations of the amounts generated in 2002 by subsidiaries acquired in 2001 for the corresponding pre-acquisition period of 2002 so as to present the continuing operations 2002 based on comparable operations. For example, operations acquired 2001 include the first quarter result for Astor Sp. z o.o. which was acquired on April 5, 2001. These results have been excluded from continuing operations for 2002 so as to show the impact of a common nine-month period of ownership of Astor in continuing operations in both years.

Continuing Operations 2002: The amounts for 2002 generated by the same subsidiaries owned in 2002 and for the same corresponding period.

Total Operations 2001: This is the extract from the income statement for total operations for the fiscal year ended December 31, 2001.

Year Ended December 31,	Total Operations 2002		Operations Acquired 2002		Operations Acquired 2001		Continuing Operations 2002		Total Operations 2001
	(in thousands, except percentages)
Net Sales	293,965		102,129		4,608		187,228		178,236
Cost of goods sold, including excise taxes	255,078		89,687		4,172		161,219		154,622
Gross Profit	38,887		12,442		436		26,009		23,614
	13.2	%	12.2	%	9.5	%	13.9	%	13.2	%
Selling, general and administrative expenses	23,367		6,568		206		16,593		16,445
Depreciation of equipment	1,273		322		4		947		841
Amortization of goodwill and trademarks	202		1		1		200		762
Bad debt expense	1,431		(6	)	13		1,424		711
Operating income	12,614		5,557		212		6,845		4,855
	4.3	%	5.4	%	4.6	%	3.7	%	2.7	%
Non operating income / (expenses)
Interest income	99		25		—		74		77
Interest expense	(1,586	)	(542	)	(69	)	(975	)	(1,345	)
Realized and unrealized foreign exchange losses	(176	)	—		—		(176	)	(12	)
Other income / (expense), net	113		206		14		(107	)	83
Income before taxes	11,064		5,246		157		5,661		3,658
	3.8	%	5.1	%	3.4	%	3.0	%	2.1	%
Income tax expense	2,764		1,555		34		1,175		1,132
Net income	8,300		3,691		123		4,486		2,526
	2.8	%	3.6	%	2.7	%	2.4	%	1.4	%

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Net Sales

Total net sales for 2002 increased by 64.9%, or $115.8 million, to $294.0 million. Net sales from continuing operations increased 5.1%, or $9.0 million, to $187.2 million from a base figure of $178.2 million for 2001. The change of excise rates on Polish vodka as of October 1, 2002 had an adverse effect on our third quarter sales as the supply change de-stocked in anticipation of the change. We had anticipated being able to recover these sales as the supply chain re-stocked in the fourth quarter and as sales, which had previously been lost to unofficial channels came through normal supply lines. As a result of both the restocking and the migration of unofficial sales to normal channels, total net sales for the three months ended December 31, 2002 was $113.4 million as compared to $57 million for the same period of 2001, an increase of 99%. Of the $113.4 million, $44.9 million relates to acquisitions and $68.5 million from continuing operations, which represents a 20.2% core growth rate year over year.

Gross Profit

Total gross profit on sales increased by 64.7% or $15.3 million. When expressed as a percentage of sales, gross margins were 13.2% for both years. While core gross margins have increased to 13.9%, the new businesses acquired in 2002 achieved a margin of 12.3%. Because these newly acquired businesses contributed 32% of the total gross margin, the lower margin achieved in these units had a dilutive effect on the whole. The improvement in the margins can be attributed to both the improved terms reached with suppliers following the acquisitions of Damianex and AGIS which, in turn, reflected back into the pre-acquisition group, and to the Company’s ongoing program of migrating its client base from second tier distributors towards retailers and on premise accounts.

Operating Expenses

Total selling, general and administrative (S,G&A) expenses increased 42.7% from $16.4 million in 2001 to $23.4 million in 2002. When expressed as a percentage of sales, total S,G&A decreased from 9.2% for 2001 to 7.9% for 2002. This improvement is attributable to both improvement in core S,G&A, which fell to 8.9%, and to the significantly lower cost basis achieved by the new acquisitions which operate in provincial areas. The reduction in core S,G&A has resulted from ongoing reviews of operations both in terms of staffing levels and in the choice of suppliers, and terms achieved on the delivery of goods and services to the whole group.

Depreciation of fixed assets and equipment increased by 51.4% from $841,000 in 2001 to $1.27 million in 2002. The increase is attributable to the amount of assets acquired with Damianex and AGIS. On core operations, depreciation has increased 12.6%, mainly due to the introduction of new business software in three of the subsidiaries.

Amortization of goodwill and trademarks has decreased by $560,000 from $762,000 for 2001 to $202,000 for 2002. This reduction is primarily the result of the application of the requirements of FSAB 142, which no longer allows the Company to amortize goodwill but instead require companies to perform regular impairment reviews. The Company has performed an impairment review and concluded that no adjustment is required. The Company amortizes trademarks over a 20-year period.

Bad debt expense in total increased 101.3% or $720,000 from $711,000 for 2001 to $1.43 million for 2002. This increase has mainly attributable to continuing operations as management has focused on the aging of its

26

receivables in light of the current economic situation in Poland. As a percentage of sales, the provision represents 0.49% for 2002 compared to 0.4% for 2001, which is within management guidelines of 0.3% to 0.5% of sales.

Operating Income

Total operating income increased 159.8%, or $7.8 million, to $12.6 million for 2002. Expressed as a percentage of sales, total operating income for 2002 was at 4.3% as opposed to 2.7% for 2001. Core operating income increased 40.0% from $4.9 million for 2001 to $6.8 million for 2002. The significant increase in operating margins is a direct result of the Company’s ability to leverage its size from both the buy side and the sell side of its gross margins. In addition, the Company has also been able to leverage its position on overhead reduction through centralizing contracts for items such as gasoline, insurance, leasing, trucks, telecommunications, office and warehouse supplies.

During the fourth quarter of 2002, the Company refined its inventory valuation method to better estimate direct costs incurred in bringing the inventory to its existing condition and location. This change in estimate resulted in a net increase to operating profit of $449,000.

Interest Expense

Total net interest expense increased $241,000, or 17.9%, from $1.35 million for 2001 to $1.59 million for 2002. As a percentage of sales, total interest fell from 0.75% in 2001 to 0.5% in 2002. Interest cover has increased from 3.6 times in 2001 to 7.9 times in 2002. During 2002, interest rates fell significantly in Poland from an average of 16.1% in 2001 to 9.0% in 2002. The Company increased its debt level during 2002 primarily to fund its acquisitions of Damianex, AGIS and Onufry, which added approximately $5.0 million to long-term debt. As mentioned in the overview, the Company makes extensive use of COD rebates when the discount offered is significantly better than the effective rate of bank borrowing. While taking advantage of COD terms increases the Company’s short term borrowings and interest expense, we believe it also results in improved overall margins.

Net Realized and Unrealized Foreign Currency Losses

The net charge relating to foreign exchange losses increased to $176,000 for 2002 versus a net charge of $12,000 for 2001. Since 2000, the Company has tried to contain the foreign exchange risk on its non Polish zloty denominated debt through the use of hedging instruments which as a rule are expensive in Poland compared to more establish markets and it is this which was behind the increase. In November 2002, the Company made the decision to migrate virtually all of its long-term acquisition debt from U.S. Dollars and Euro into Polish zloty. The Company feels that the reduction in local interest rates justified this move as it also allowed the Company to eliminate the main source of potential foreign exchange movements.

Income Tax

The total tax charge for 2002 was $2.8 million, which represented 25.0% of pre-tax profits. For 2001, the charge was $1.1 million, which represented 30.9% of pre-tax profits. The monetary increase in income tax has been primarily due to the 202% increase in pre-tax profits from $3.7 million to $11.1 million.

During 2002, the Company has undergone an analysis of its bad debt provisions following a change in Polish tax law which became effective in 2002, allowing for the accelerated tax deductability on unpaid debts. Following this analysis, the Company was able to process more of its provisions through its statutory books and form a more definitive opinion on the recoverability of the amounts included within the deferred tax asset. As a result of this review, the Company has concluded that a valuation allowance is no longer appropriate which reduced the current year income tax charge by $307,000 and the effective rate by 2.8%.

Net Income

Total net income increased by 229%, or $5.8 million, to $8.3 million for 2002 compared to a total net income of $2.5 million for 2001. The increase was due to the factors noted above.

27

Statement of Liquidity and Capital Resources

In 2003, the Company’s operating activities absorbed $8.3 million as opposed to absorbing $1.9 million in 2002. Operating cash flows are generated by or absorbed by:

• cash earnings — defined as net earnings as adjusted for non-cash expense/income items such as depreciation.

• movements in working capital, primarily the movements of trade receivables and payables as well as inventory.

• movements in other current assets and liabilities.

In tabular form, the sources and uses of operating cash flows can be summarized as:

Year ended December 31,	2003			2002			2001
	(all values $000’s)
Cash earnings	$	18,492		$	10,552		$	4,445
Movement in trade receivables	$	(6,862	)	$	(13,782	)	$	(5,157	)
Movement in inventory	$	(4,143	)	$	(7,329	)	$	1,227
Movement in days payable	$	(14,156	)	$	11,008		$	1,089
Subtotal of movements in working capital	$	(25,161	)	$	(10,103	)	$	(2,841	)
Movements in other current assets/liabilities	$	(1,583	)	$	(2,299	)	$	1,138
Net cash (used in)/generated by Operating Activities	$	(8,252	)	$	(1,850	)	$	2,139
Movement in COD support	$	11,863		$	7,745		$	2,450
Pro forma cash generated by Operating Activities	$	3,611		$	5,895		$	4,589

The need for additional working capital was at its highest at December 31, 2003 due to the strong seasonality of sales which resulted in December 2003 sales being 15% of full year sales. This working capital requirement was further affected by our acquisition of Multi-Ex in mid-November.

The net cash used in operating activities is affected by the Company’s use of COD terms. Use of COD, where the Company waives its 60-day payment terms in exchange for additional early settlement discounts, effectively replaces with bank funding the support a business would normally receive from suppliers in managing overall working capital needs. The effect of presenting the movement in COD would be to show an increase in funds generated by operations while showing a reduction in funding. The increased use of COD in 2003 has been driven both by increased activity and an increase in the percentage of purchases to which we attach COD terms. For 2003, the percentage of COD from domestic suppliers was 55% whereas for 2002 it was 47%.

December 31,	2003			2002			2001
Pro forma sales (full year including pre-acquisition)	$	515,674		$	357,194		$	184,426
Pro forma cost of goods sold (full year including pre-acquisition)	$	447,605		$	310,044		$	160,081
Debtor days (excluding VAT of 22%)		56.0			57.6			64.9
Inventory days (excluding VAT of 22%)		28.5			28.6			20.5
Days payable (excluding VAT of 22%)		(43.9	)		(51.6	)		(55.5	)
Net Working Capital Days		40.6			34.6			29.9

The Company has paid particular attention to debtor management over the past two years driving down both debtor days and allowances for doubtful debts. Inventory rotation has remained stable at 12.8 times a year. Days payable is a function of the amount of COD purchases the Company decides to make, a point indicated in both of the above tables.

Investing activities amounted to $5.5 million in 2003 and are in most part related to the acquisitions of Dako-Galant, Panta-Hurt and Multi-Ex. In addition, the Company has been upgrading its IT systems as well as starting the construction of its new regional distribution center in the Southeast of Poland. During 2002, the investing activities amounted to $14.6 million which was primarily for the acquisitions of AGIS and Damianex.

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Financing activities generated a total of $17.1 million, of which $19.3 million was the net proceeds of the private placement of the Company’s common stock in March 2003. The Company also received $2.0 million as a result of option holders exercising their options during the year. The receipt of these funds enabled the Company to reduce its debt during the year, although this has returned to a similar level as the previous year following the recent acquisitions.

The nature of the Company’s business is that it has to invest in working capital, mainly Polish vodka on COD terms, towards the end of the calendar year, which is traditionally its busiest selling period. With this in mind, the Company arranged for various short-term funds to be available to it which increased total debt by approximately $2.9 million. At December 31, 2002, the Company had $4.5 million of unused credit facilities available to it under these short-term agreements.

Total forward contracted obligations are:

	2004		2005		2006		2007		2008		2008+
Obligations under property leases	$	1,152	$	1,152	$	1,152	$	1,152	$	1,152	$	1,752
Capital leases	$	1,391	$	1,273		—		—		—		—
Bank repayments/facility expiry	$	30,441	$	29	$	497		—		—		—
Totals	$	32,984	$	2,454	$	1,649	$	1,152	$	1,152	$	1,752

It should be noted that the $30.4 million bank repayment relates only to the expiry of the current short term overdraft and loan facilities. The Company does not foresee and problems in renewing these facilities.

Statement on Inflation and Currency Fluctuations

Inflation in Poland was 1.7% for 2003 as compared to 1.1% in 2002.

The Company’s operating cash flows and virtually all of its assets are denominated in Polish zloty. In November 2002, the Company migrated nearly all its term loan facilities from U.S. Dollar and Euro to Polish zloty denominated loans. The Company is exposed to translation risk arising from the restatement of its financial statements from Polish zloty to U.S. Dollars.

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Seasonality

The Company’s net sales have been historically seasonable with on average 30% of the net sales occurring in the fourth quarter. During 2003, net sales in the fourth quarter represented 33% of full year sales compared to 39% for the fourth quarter of 2002. The quarterly figure for 2002 was higher because of the recovery following the excise tax change on October 1, 2002. The table below demonstrates the movement and significance of seasonality on the income statement.

	First Quarter						Second Quarter						Third Quarter						Fourth Quarter
	2003			2002			2003(1)			2002(2)			2003(3)			2002			2003(4)			2002(5)
Net Sales	$	79,468		$	42,650		$	105,122		$	71,458		$	104,844		$	66,508		$	139,684		$	113,349
Seasonality		18.5	%		14.5	%		24.5	%		24.3	%		24.4	%		22.6	%		32.6	%		38.6	%
Gross Profit		10,483			5,879			13,616			9,525			13,486			8,428			18,895			15,056
Gross Margin		13.2	%		13.8	%		13.0	%		13.3	%		12.9	%		12.7	%		13.5	%		13.3	%
Operating Income		3,140			1,298			5,148			3,158			4,929			1,766			8,950			6,392
Net Income	$	1,917		$	782		$	3,459		$	1,941		$	3,604		$	1,017		$	6,095		$	4,561
Net income per common share—diluted	$	0.21		$	0.12		$	0.33		$	0.24		$	0.34		$	0.12		$	0.56		$	0.50

1. Includes purchase of Dako-Galant.

2. Includes purchases of Damianex and AGIS

3. Includes purchase of Panta-Hurt

4. Includes purchase of Multi-Ex

5. Includes purchase of Onufry

The Company’s working capital requirements are also seasonal, and are normally highest in the months of December and January. Liquidity then normally improves as collections are made on the seasonally higher fourth quarter receivables.

Critical Accounting Policies and Estimates

General

The Company’s discussion and analysis of its financial condition and results of operations are based upon the Company’s consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of net sales, expenses, assets and liabilities. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.

30

Revenue and Margin Recognition

The Company only recognizes revenue and margin when goods have been shipped to customers on the basis of a validated customer order and where a delivery acceptance note as signed by the customer has been returned to the Company. Sales are stated net of customer discounts and sales tax.

Expenses

The Company recognizes expenses in the period in which either the cost is incurred or in the period in which the associated revenue and margin have been recognized.

Provisions for Doubtful Debts

The Company makes general provision for doubtful debt based on the aging of its trade receivables. Where circumstances require, the Company will make specific provision for any excess not provided for under the general provision.

Inventory

Because of the nature of the products supplied by the Company, great attention is paid to inventory rotation. Where goods are estimated to obsolete or unmarketable they are written down to a value reflecting the saleable value in their relevant condition.

During the fourth quarter of 2002, the Company changed its inventory valuation methodology to better reflect the impact of volume related supplier discounts and the costs associated with storage and handling. The basis of the adjustment is to reduce inventory and thereby reduce operating profit by the amount of volume related supplier bonuses deemed to be within closing inventory. Against this an allocation of overheads which are attributable to inventory receipt and storage is added to inventory and thereby increases operating profit.

Goodwill and Intangibles

Acquired goodwill is no longer amortized as required by FASB 142. Instead the Company assesses the recoverability of its goodwill at least once a year or whenever adverse events or changes in circumstances or business climate indicate that expected future cash flows (undiscounted and without interest charges) for individual business units may not be sufficient to support the recorded goodwill. If undiscounted cash flows are not sufficient to support the goodwill, an impairment charge would be recognized to reduce the carrying value of the goodwill based on the expected discounted cash flows of the business unit. No such charge has been considered necessary through the date of the accompanying financial statements. Intangibles (trademarks) are amortized over ten years.

Recently issued accounting pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities an interpretation of ARB No. 51 (“FIN 46”). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The disclosure provisions of FIN 46 are effective for financial statements initially issued after January 31, 2003. Public entities with a variable interest in a variable interest entity created before February 1, 2003 shall apply the consolidation requirements of FIN 46 to that entity no later than the beginning of the first annual reporting period beginning after June 15, 2003. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. Adoption of FIN 46 is not expected to have a significant impact on the financial statements.

31

Item  7A. Quantitative and Qualitative Disclosure about Market Risk.

Exchange Rate Fluctuations

Translation Risks

The Company’s operations are conducted primarily in Poland and its functional currency is the Polish zloty and its reporting currency is the U.S. Dollar. The Company’s financial instruments consist mainly of cash and cash equivalents, accounts receivable, accounts payable and receivable, inventories, bank loans, overdraft facilities and long-term debt. All of the monetary assets represented by these financial instruments are located in Poland; consequently, they are subject to currency translation risk when reporting in U.S. Dollars.

If the U.S. Dollar increases in value against the Polish zloty, the value in U.S. Dollars of assets, liabilities, revenues and expenses originally recorded in Polish zloty will decrease. Conversely, if the U.S. Dollar decreases in value against the Polish zloty, the value in U.S. Dollars of assets, liabilities, revenues and expenses originally recorded in Polish zloty will increase. Thus, increases and decreases in the value of the U.S. Dollar can have an impact on the value in U.S. Dollar of our non U.S. Dollar assets, liabilities, revenues and expenses, even if the value of these items has not changed in their original currency.

Transaction Risk

Commercial Exposure. Our commercial foreign exchange exposure mainly arises from the purchase of imported alcoholic beverage in currencies other than our functional currency of the Polish zloty. Thus, accounts payable for imported beverages are billed in various currencies and the Company is subject to short-term changes in the currency markets for product purchases. The Company also operates a bonded warehouse where the inventory acquired from foreign suppliers is recorded in its source currency. Thus, any currency movement on trade payables resulting from either a strengthening or weakening of the Polish zloty against a foreign suppliers currency is often compensated for by an opposite movement relating to inventories recorded in the imported currency.

Below is a table indicating the respective trade payable and imported inventory in U.S. Dollars (USD), British Pounds Sterling (GBP) and Euro (EUR). Please note that on January 1, 2002, the Euro became the functional currency across the “Euro zone”, and therefore items disclosed as EUR may actually have been initially recorded in the base currency of December 31, 2001. These have been restated to Euro to reflect the corresponding settlement risk.

	2003		2002
Trade Payables	Local Currency	USD Equivalent	Local Currency	USD Equivalent
USD	97,087	97,087	235,052	235,052
GBP	12,717	22,672	15,625	25,312
EUR	1,087,493	1,371,395	1,062,708	1,050,118
Total		1,491,154		1,310,482
Inventories	Local Currency	USD Equivalent	Local Currency	USD Equivalent
USD	271,035	271,035	142,919	142,919
GBP	23,062	41,115	19,744	31,985
EUR	506,512	638,743	431,059	449,730
Total		950,893		624,634
Trade Receivables	Local Currency	USD Equivalent	Local Currency	USD Equivalent
USD	7,007	7,007	—	Nil
GBP	24,245	43,224	—	Nil
EUR	54,322	68,503	—	Nil
Total		118,734		Nil

32

Financial Exposure. Our general policy requires our subsidiaries to borrow funds and invest excess cash in the same currency as their functional currency, the Polish zloty, where these funds are needed for and generated by operations. Where funds are needed for investment and acquisition purposes in previous years, they have been taken in U.S Dollar and Euro. In November 2002, the Company decided that the reducing interest rate differential between Polish and U.S. base rates no longer justified the exposure to foreign exchange losses on the non Polish denominated debt. Therefore, the Company decided to transfer the majority, approximately 98%, of its acquisition debt to Polish-denominated debt. Total exposure to various currencies on the Company’s bank funding for December 31, 2002 and 2003 is given in the table below.

	Year of Maturity (Thousands of USD)
	2003		2002
Bank loans payable in USD	$	—	$	744
Bank loans payable in Polish zloty		11,849		17,334
Bank overdrafts payable in Polish zloty		19,118		12,289
Total Bank Funding	$	30,967	$	30,367

Loans with a contractual term of one year have been automatically renewed in the past and the Company expects them to be renewed in the future. Bank loans and overdrafts denominated in Polish zloty are also renewable after one year and have been presented according to their legal form. More details of the repayments dates and conditions of both the short-term and long-term loans can be found in note 8 of the financial statements.

Bank borrowings are sensitive to interest and foreign currency market risks as they usually bear interest at variable rates and are denominated in various currencies. In 2002, the Company increased management of its currency risk through the use of forward contracts for periods between three and six months. However, in November 2002, the Company decided that the reduced interest rates in Poland and the uncertainty of currency markets warranted the conversion of all debt into Polish zloty. This reconfiguration of the loan portfolio meant that the Company no longer requires uses forward exchange contracts.

Exchange rates	December 31, 2003	December 31, 2002
Polish zloty / U.S. Dollar	3.7405	3.8388
Polish zloty / Euro	4.7170	4.0202

Interest Rate Fluctuations

The Company may have an exposure to interest rate movements through its bank deposits and indebtedness. The Company does not enter into any hedging arrangements in regards to its interest risk exposure (i.e., interest rate swaps or forward rate agreements).

Because all of the Company’s debts are at floating rates, changes in interest rates may impact its net interest expense, positively by way of a reduction in base rates and adversely should base rates rise. The Company’s sensitivity to interest rate movements is expressed in the table below.

	December 31, 2003			December 31, 2002
Average bank debt (in $000’s)	$	25,614		$	20,198
Percentage subject to variable interest rates		100	%		100	%
Impact (in $000’s) on net interest charge from 1% change in base rates	$	256.1	+/-	$	202.0	+/-

33

Item  8. Financial Statements and Supplementary Data.

Index to Consolidated Financial Statements:
Report of Independent Auditors	35
Consolidated Balance Sheets at December 31, 2003 and 2002	36
Consolidated Statements of Income for the years ended December 31, 2003, 2002 and 2001	37
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2003, 2002 and 2001	38
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001	39
Notes to Consolidated Financial Statements	40-59

34

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders

Central European Distribution Corporation

We have audited the accompanying consolidated balance sheet of Central European Distribution Corporation (“Company”) and its subsidiaries as of December 31, 2003, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Company as of December 31, 2002 and for the two years then ended were audited by other auditors whose report dated March 14, 2003 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2003, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

PricewaterhouseCoopers Sp. z o.o.

Warsaw, Poland

March 11, 2004

35

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED BALANCE SHEETS

Amounts in columns expressed in thousands

	December 31,
	2003			2002
ASSETS
Current Assets
Cash and cash equivalents	$	6,229		$	2,237
Accounts receivable, net of allowance for doubtful accounts of $6,380 and $3,945 at December 31, 2003 and 2002, respectively		90,071			64,803
Inventories		35,012			24,321
Prepaid expenses and other current assets		5,249			3,314
Deferred income taxes		1,201			713
Total Current Assets		137,762			95,388
Intangible assets, net		2,506			2,868
Goodwill, net		35,618			25,323
Equipment, net		10,115			5,910
Deferred income taxes		1,382			924
Other assets		87			387
Total Assets	$	187,470		$	130,800
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	65,776		$	53,435
Bank loans and overdraft facilities		30,441			20,353
Income taxes payable		977			499
Taxes other than income taxes		1,230			513
Other accrued liabilities		3,011			2,079
Current portions of obligations under capital leases		1,282			316
Current portion of long-term debt		29			3,820
Total Current Liabilities		102,746			81,015
Long-term debt, less current maturities		497			6,195
Long-term obligations under capital leases		1,173			428
Redeemable common stock		—			1,781
COMMITMENTS AND CONTINGENCIES
Shareholders’ Equity
Preferred Stock ($0.01 par value, 1,000,000 shares authorized; no shares issued and outstanding)		—			—
Common Stock ($0.01 par value, 20,000,000 shares authorized, 10,876,329 and 6,005,263 shares issued at December 31, 2003 and 2002, respectively)		109			60
Additional paid-in-capital		52,805			27,381
Retained earnings		30,536			15,461
Accumulated other comprehensive loss		(246	)		(1,371	)
Less Treasury Stock at cost (109,350 shares at December 31, 2003 and 2002)		(150	)		(150	)
Total Shareholders’ Equity		83,054			41,381
Total Liabilities and Shareholders’ Equity	$	187,470		$	130,800

See accompanying notes.

36

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

Amounts in columns expressed in thousands

(except per share data)

	Year ended December 31,
	2003		2002		2001
Net sales	$	429,118	$	293,965	$	178,236
Cost of goods sold		372,638		255,078		154,622
Gross profit		56,480		38,887		23,614
Selling, general and administrative expenses		31,594		23,367		16,445
Bad debt provision		592		1,431		711
Depreciation of tangible fixed assets		1,672		1,273		841
Amortization of intangible assets		455		202		762
Operating income		22,167		12,614		4,855
Non-operating income / (expense)
Interest expense		(1,633)		(1,586)		(1,345)
Interest income		133		99		77
Realized and unrealized foreign currency transaction losses, net		(92)		(176)		(12)
Other income / (expense), net		(59)		113		83
Income before income taxes		20,516		11,064		3,658
Income tax expense		5,441		2,764		1,132
Net income	$	15,075	$	8,300	$	2,526
Net income per share of common stock, basic	$	1.48	$	1.03	$	0.39
Net income per share of common stock, diluted	$	1.44	$	0.99	$	0.38

See accompanying notes.

37

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Amounts in columns expressed in thousands

	Common Stock							Additional Paid-in Capital			Retained Earnings		Accumulated other comprehensive loss			Total
	Issued			In Treasury
	No. of Shares	Amount		No. of Shares	Amount
Balance at December 31, 2000	4,402	$	45	64		(120	)	$	14,175		$	4,635	$	(2,243	)	$	16,492
Net income for 2001	—		—	—		—			—			2,526		—			2,526
Foreign currency translation adjustment	—		—	—		—			—			—		559			559
Comprehensive income for 2001	—		—	—		—			—			2,526		559			3,085
Treasury shares purchased	—		—	9		(30	)		—			—		—			(30	)
Common stock issued in connection with options	70		1	—		—			611			—		—			612
Common stock issued in connection with acquisitions	32		—	—		—			597			—		—			597
Balance at December 31, 2001	4,504	$	46	73	$	(150	)	$	15,383		$	7,161	$	(1,684	)	$	20,756
Net income for 2002	—		—	—		—			—			8,300		—			8,300
Foreign currency translation adjustment	—		—	—		—			—			—		313			313
Comprehensive income for 2002	—		—	—		—			—			8,300		313			8,613
Common stock issued in private placement	800		8	—		—			7,398			—		—			7,406
Common stock issued in connection with options	409		3	—		—			943			—		—			946
Common stock issued in connection with acquisitions	292		3	—		—			3,657			—		—			3,660
Balance at December 31, 2002	6,005	$	60	73	$	(150	)	$	27,381		$	15,461	$	(1,371	)	$	41,381
Net income for 2003	—		—	—		—			—			15,075					15,075
Foreign currency translation adjustment	—		—	—		—			—					1,125			1,125
Comprehensive income for 2003	—		—	—		—			—			15,075		1,125			16,200
Effect of stock split June 2, 2003	3,003		30	—		—			(30	)		—		—
Redeemable common stock				—		—			1,781			—		—			1,781
Common stock issued in private placement	1,350		14	—		—			19,294			—		—			19,308
Common stock issued in connection with options	366		4	—		—			2,031			—		—			2,035
Common stock issued in connection with acquisitions	152		1	—		—			2,348			—		—			2,349
Balance at December 31, 2003	10,876	$	109	73	$	(150	)	$	52,805		$	30,536	$	(246	)	$	83,054

See accompanying notes.

38

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Amounts in columns expressed in thousands

	Year ended December 31,
	2003			2002			2001
Operating Activities
Net income	$	15,075		$	8,300		$	2,526
Adjustments to reconcile net income to net cash provided by / (used in) operating activities:
Depreciation and amortization		2,127			1,475			1,603
Deferred income tax benefit		698			(654	)		(395	)
Bad debt provision		592			1,431			711
Changes in operating assets and liabilities:
Accounts receivable		(6,862	)		(13,782	)		(5,157	)
Inventories		(4,143	)		(7,329	)		1,227
Prepayments and other current assets		(1,183	)		(1,218	)		(700	)
Trade accounts payable		(14,156	)		11,008			1,089
Income and other taxes		766			(730	)		226
Other accrued liabilities and other		(1,166	)		(351	)		1,009
Net Cash (used in) / provided by Operating Activities		(8,252	)		(1,850	)		2,139
Investing Activities
Purchases of equipment		(2,292	)		(819	)		(735	)
Proceeds from the disposal of equipment		647			332			101
Acquisitions of subsidiaries, net of cash acquired		(3,874	)		(14,158	)		(1,763	)
Net Cash Used In Investing Activities		(5,519	)		(14,645	)		(2,397	)
Financing Activities
Borrowings on bank loans and overdraft facility		3,611			7,420			8,653
Payment of bank loans and overdraft facility		3,408			—			(1,335	)
Long-term borrowings		—			2,845			1,827
Payment of long-term borrowings		(9,935	)		(2,351	)		(9,959	)
Payment of capital leases		(1,297	)		(248	)		—
Net proceed from private placement issuance of shares		19,308			7,406			—
Options exercised		2,035			946			537
Purchase of treasury shares		—			—			(30	)
Net Cash provided by / (used in) Financing Activities		17,130			16,018			(307	)
Currency effect on brought forward cash balances		633			248			603
Net Increase / (Decrease) in Cash		3,992			(229	)		38
Cash and cash equivalents at beginning of period		2,237			2,466			2,428
Cash and cash equivalents at end of period	$	6,229		$	2,237		$	2,466
Supplemental Schedule of Non-cash Investing Activities
Common stock issued in connection with investment in subsidiaries (Note 6)	$	1,813		$	3,660		$	596
Common Stock issued to consultants	$	—		$	306		$	74
Capital leases	$	2,028		$	324		$	516
Supplemental disclosures of cash flow information
Interest paid	$	1,633		$	1,528		$	1,241
Income tax paid	$	5,221		$	3,304		$	1,216

See accompanying notes.

39

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

1. Organization and Description of Business

Central European Distribution Corporation (CEDC), a Delaware Corporation, and its subsidiaries (collectively referred to as the Company) operates primarily as a wholesale distributor of fine wines, beers and liquors across Poland. Based in Warsaw and operating through nine distribution centers and 58 satellite branches the Company offers a 24 hour delivery service of alcoholic beverages to both the on and off trade. Since its incorporation in September 1997 the Company has acquired 100% of the outstanding common stock or 100% of the voting rights of its 12 subsidiaries, a summary of which can be found in note 6 to these financial statements.

The Company through its various subsidiaries derives all its revenues in Poland.

2. Summary of Significant Accounting Policies

The significant accounting policies and practices followed by the Company are as follows:

Basis of Presentation

The consolidated financial statements include the accounts of CEDC and its subsidiaries all of which the Company wholly owns or owns 100% of the voting rights. All inter-company accounts and transactions have been eliminated in the consolidated financial statements.

CEDC’s subsidiaries maintain their books of account and prepare their statutory financial statements in Polish Zloties (PLN) in accordance with Polish statutory requirements and the Accounting Act of 29 September 1994. The subsidiaries’ financial statements have been adjusted to reflect accounting principles generally accepted in the United States of America (U.S. GAAP).

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates and such differences may be material to the consolidated financial statements.

Foreign Currency Translation and Transactions

For all of the Company’s subsidiaries the functional currency is the local currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each year-end. The Income Statements are translated at the average rate of exchange prevailing during the respective year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of shareholders’ equity. Transaction adjustments arising from operations as well as gains and losses from any specific foreign currency transactions are included in the reported net income for the period.

The accompanying consolidated financial statements have been presented in U.S. Dollars.

The exchange rates used on Polish zloty denominated transactions and balances for translation purposes as of December 31, 2003 and 2002 for one U.S. Dollar were 3.74 PLN and 3.84 PLN, respectively. As of March 11, 2004 the rate had changed to 3.91 PLN.

40

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

Tangible Fixed Assets

Tangible fixed assets are stated at cost, less accumulated depreciation. Depreciation of tangible fixed assets is computed by the straight-line method over the following useful lives:

Type	Depreciation life in years
Transportation equipment under capital leases	5
Transportation equipment not under capital lease	5
Software	2
Computers and IT equipment	3
Beer dispensing and other equipment	2—10
Freehold land	Not depreciated
Freehold buildings	40

Leased equipment meeting certain criteria is capitalized and the present value of the related lease payments is recorded as a liability. Amortization of capitalized leased assets is computed on a straight-line method over the useful life of the relevant assets.

Where equipment costs less than $900 per transaction, it is expensed to the income statement as incurred.

The Company periodically reviews its investment in tangible fixed assets and when indicators of impairment exist and if the value of the asset is impaired, an impairment loss is recognized.

Goodwill

As required by FASB 142, acquired goodwill is no longer amortized. Instead the Company assesses the recoverability of its goodwill at least once a year or whenever adverse events or changes in circumstances or business climate indicate that expected future cash flows (undiscounted and without interest charges) for business units of a similar economic nature may not be sufficient to support the recorded goodwill. If undiscounted cash flows were to be insufficient to support the goodwill, an impairment charge would be recognized to reduce the carrying value of the goodwill based on the expected discounted cash flows of the business units. No such charge has been considered necessary through the date of the accompanying financial statements.

Intangible assets other than Goodwill

Intangibles consist primarily of acquired trademarks. The trademarks are amortized on a straight-line basis over the period of the expected economic benefits (10 years).

Revenue Recognition

Revenue derived from beverage distribution is recognized when goods are shipped to customers and where a delivery acceptance note signed by the customer has been returned to the Company. Sales are stated net of turnover related customer discounts, an estimate of customer returns and sales tax (VAT).

41

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

Shipping and Handling Costs

Where the Company has incurred costs in shipping goods to its warehouse facilities these costs are recorded as part of inventory and then to costs of goods sold. Shipping and handling costs associated with distribution are recording in Selling, General and Administrative (S,G&A) costs.

Marketing and Promotion Costs

The Company does not involve itself in direct advertising but manages the marketing and promotional budgets of suppliers for which it has exclusive distribution rights. Where the Company incurs marketing and promotional costs, which do not have a direct revenue benefit, such costs are charged to selling, general and administrative expenses as they are incurred.

Accounts Receivable

Accounts receivables are recorded based on the invoice price, inclusive of VAT (sales tax), and where a delivery note has been signed by the customer and returned to the Company. The allowances for doubtful accounts are based upon the aging of the accounts receivable. The Company makes an allowance based on a sliding scale which culminates in a 100% provision should the receivable be over one year old. However, where circumstances require, the Company will also make specific provisions for any excess not provided for under the general provision. When a final determination is delivered to the Company regarding the non-recovery of a receivable, the Company then charges the unrecoverable amount to the accumulated allowance.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market value. Cost includes customs duty (where applicable), and all costs associated with bringing the inventory to a condition for sale. These costs include importation, handling, storage and transportation costs, and exclude rebates received from suppliers, which are reflected as reductions to closing inventory. Inventories are comprised primarily of beer, wine, spirits and non-alcoholic beverages.

During the fourth quarter of 2002, the Company changed its inventory valuation methodology to better estimate direct costs associated with storage and handling. The impact of the change is discussed in the section Management Discussion and Analysis for years ended December 31, 2002.

Cash and Cash Equivalents

Short-term investments which have a maturity of three months or less from the date of purchase are classified as cash equivalents. As at December 31, 2003, approximately $2.2 million was in U.S Dollars within the Company with the balance being in the accounts of the subsidiaries in accounts denominated in PLN.

Income Taxes and Deferred Taxes

The Company computes and records income taxes in accordance with the liability method. Deferred tax assets and liabilities are recorded based on the difference between the accounting and tax basis of the underlying assets and liabilities based on enacted tax rates expected to be in effect for the year in which the differences are expected to reverse.

42

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

Employee Retirement Provisions

Under Polish Labor Laws, the Company is required to provide each employee reaching their 65^th birthday while employed by the Company with a bonus of one month salary. The Company expenses these amounts when incurred as they do not represent a material amount in aggregate.

Employee Stock-Based Compensation

At December 31, 2003, the Company has the 1997 Stock Incentive Plan (“Incentive Plan”) under which all stock-based compensation awards are granted to directors, executives, and other employees and to non-employee service providers of the Company. The Incentive Plan is described more fully in Note 13. The Company accounts for grants to employees under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. For grants to employees, no stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price at least equal to the market value of the underlying common stock on the date of grant. The table presented in Note 13 illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

Stock-based compensation awards are also granted to non-employee service providers under the Incentive Plan. The Company accounts for grants to non-employee service providers in accordance with the fair value method FASB Statement No. 123.

Financial Instruments

In November 2002, the Company made the decision to convert nearly all (98%) of its non-Polish zloty denominated debt into Polish zloty. This decision was made because the falling interest rates in Poland versus the costs of hedging instruments no longer justified any perceived benefit of holding non- Polish zloty debt. A consequence of this decision is that from November 2002 the Company no longer uses derivative financial instruments.

Prior to November 2002, the Company used derivative financial instruments (forward foreign currency contracts) to hedge transactions denominated in foreign currencies in order to reduce the currency risk associated with fluctuating exchange rates. Such contracts were used primarily to hedge certain foreign denominated obligations. The Company’s policy was to maintain hedge coverage only on existing obligations. The derivative instruments were valued at fair value and the gains and losses on these contracts offset changes in the values of the related exposures in accordance with SFAS 138 (Accounting for Certain Instruments and Certain Hedging Activities) . The principal currencies hedged were the U.S. Dollars, and the Euro. The duration of the hedge contract typically did not exceed six months.

Comprehensive Income / (Loss)

Comprehensive income / (loss) is defined as all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income / (loss) includes net income adjusted by, among other items, foreign currency translation adjustments. The foreign translation losses/gains on the re-measurements from PLN to U.S. dollars are classified separately and are the only component of the accumulated other comprehensive income included in shareholders’ equity.

Additionally, translation gains and losses with respect to long-term subordinated inter-company loans with the parent company are charged to other comprehensive gains. No deferred tax benefit has been recorded

43

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

on the comprehensive gains in regards to the long-term inter-company transactions with the parent company, as the repayment of any equity investment is not anticipated in the foreseeable future.

Segment Reporting

The Company operates in one industry segment, the distribution of alcoholic and non-alcoholic beverages. These activities are conducted by the Companies subsidiaries in Poland. Substantially all revenues, operating profits and assets relate to this business. CEDC assets (excluding inter-company loans and investments) located in the United States of America represent less than 1% of consolidated assets.

Net Income Per Common Share

Net income per common share is calculated in accordance with SFAS No. 128, “Earnings per Share”. Basic earnings per share (EPS) are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the year. The stock options and warrants discussed in Note 13 were included in the computation of diluted earnings per common share (Note 10).

Recently issued accounting pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities an interpretation of ARB No. 51 (“FIN 46”). FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The disclosure provisions of FIN 46 are effective for financial statements initially issued after January 31, 2003. Public entities with a variable interest in a variable interest entity created before February 1, 2003 shall apply the consolidation requirements of FIN 46 to that entity no later than the beginning of the first annual reporting period beginning after June 15, 2003. FIN 46 is effective for all new variable interest entities created or acquired after January 31, 2003. Additionally, in December 2003 the FASB issued FASB Interpretation No. 46 R (FIN 46 R) being an update of FASB 46. FIN 46 R must be adopted no later than the end of the first interim or annual reporting period ending after March 15, 2004. Adoption of FIN 46 and FIN 46 R is not expected to have a significant impact on the financial statements.

3. Trade Receivables and Allowances for Doubtful Accounts

	Year ended December 31,
	2003			2002		2001
Net trade receivables—excluding VAT	$	79,058		$	56,351	$	32,813
VAT (sales tax)		17,393			12,397		7,219
Gross trade receivables	$	96,451		$	68,748	$	40,032
Allowances for Doubtful Debts
Balance, beginning of year	$	3,945		$	1,930	$	1,230
Effect of FX movement on opening balance		104			74		48
Provision for bad debts—reported in income statement		592			1,357		663
Charge-offs, net of recoveries		(964	)		—		(11	)
Increase in allowance from purchase of subsidiaries		2,703			584		—
Balance, end of year	$	6,380		$	3,945	$	1,930
Trade receivables, net	$	90,071		$	64,803	$	38,102

44

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

4. Income and Deferred Taxes

The Company operates in two tax jurisdictions, Delaware in the United States of America and Poland. All Polish subsidiaries file their own corporate tax returns as well as account for their own deferred tax assets. The Company does not file a tax return in Delaware based upon its consolidated income, but based on the income statement for transactions occurring in the United States of America.

Total income tax expense varies from expected income tax expense computed at Polish statutory rates (28% in 2001, 28% in 2002 and 27% in 2003) as follows:

	Year ended December 31,
	2003			2002			2001
Tax at Polish statutory rate	$	5,539		$	3,098		$	1,024
Movements in deferred tax asset valuation allowance primarily due to bad debts		—			(307	)		134
Effect of brought forward tax losses of acquired subsidiary		(155	)		—			—
Effect of relief for dividends paid by subsidiaries		(528	)		—			—
Tax rate differential on U.S. tax losses		(47	)		—			—
Effect of foreign currency exchange rate change on net deferred tax assets		14			(28	)		(40	)
Effect of changes in tax rates on net deferred tax assets		620			(12	)		—
Permanent differences		2			13			14
Total income tax expense	$	5,441		$	2,764		$	1,132
Current Polish income tax expense	$	4,742		$	3,510			1,527
Deferred Polish income tax (benefit) / expense, net		913			(433	)		(331	)
Deferred U.S. income tax (benefit)		(214	)		(313	)		(64	)
Total income tax expense	$	5,441		$	2,764		$	1,132

Total Polish income tax payments (or amounts used as settlements against other statutory liabilities) during 2003, 2002 and 2001 were $5,221,000, $3,304,000 and $1,216,000 respectively. CEDC has paid no U.S. income taxes and has losses to carry forward totaling $2,497,000, of which $859,000 will expire in 2016 and $1,638,000 will expire beyond 2017.

Significant components of the Company’s deferred tax assets are as follows:

	December 31,
	2003		2002
Deferred tax assets:
Allowance for doubtful accounts receivable	$	935	$	375
Unrealized foreign exchange losses/(gains), net		40		—
Accrued expenses, deferred income and prepaid, net		601		469
Tax benefit derived from sales to subsidiaries		257		434
CEDC operating loss carry-forward benefit, expiring in 2012—2016		774		474
Net deferred tax asset	$	2,607	$	1,752
Deferred tax liability
Deferred income	$	15	$	83
Timing differences in finance type leases	$	9	$	32
Net deferred tax liability	$	24	$	115
Total net deferred tax asset	$	2,607	$	1,752
Total net deferred tax liability	$	24	$	115
Total net deferred tax	$	2,583	$	1,637
Classified as:
Current deferred tax asset	$	1,201	$	713
Non-current deferred tax asset		1,382		924
	$	2,583	$	1,637

45

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

In December 2003, legislation was enacted which reduced the corporate income tax rates in Poland effective January 1, 2004. The enacted tax rate of 27% was reduced to 19%. This reduced the deferred tax asset by approximately $620,000.

Prior to January 1, 2001, the Company had a policy to permanently reinvest their earnings. As of January 1, 2001, the Company instituted a policy of having all of its subsidiaries (except Carey Agri) pay dividends. Management intends to distribute 50% of the earnings from the Polish subsidiaries from 2001. The retained earnings prior to January 1, 2001 are not considered distributable.

No deferred taxes have been recorded for the remaining undistributed earnings as the Company intends to permanently reinvest these earnings.

The tax liabilities (including corporate income tax, Value Added Tax (VAT), social security and other taxes) may be subject to examinations by Polish tax authorities for up to five years from the end of the year the tax is payable. CEDC’s U.S. federal income tax returns are also subject to examination by the U.S. tax authorities. As the application of tax laws and regulations, and transactions are susceptible to varying interpretations, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities.

5. Intangible Assets other than Goodwill

The acquired trademarks in the amount of $4,218,000 had accumulated amortization of $1,712,000 and $1,097,000 at December 31, 2003 and 2002 respectively.

Estimated aggregate future amortization expense for intangible assets is as follows:

2004	$	455
2005		455
2006		455
2007		455
2008		455
Thereafter		231
Total	$	2,506

46

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

6. Goodwill & Acquisitions

Goodwill, presented net of accumulated amortization in the consolidated balance sheets, consists of:

Acquisition Cost	2003	2002
Opening balance	26,002	10,648
Impact of Foreign exchange	231	72
Additional cost from prior years	298	1,154
Acquisition through business combinations	9,777	14,128
Closing balance	36,308	26,002
Accumulated Amortization
Opening balance	679	679
Impact of Foreign exchange	11	—
Impairment losses	—	—
Closing balance	690	679

The Company adopted SFAS No. 142 effective January 1, 2002. Under SFAS No.142 goodwill is no longer amortized but reviewed at the end of each fiscal year for impairment, or more frequently if certain indicators arise.

47

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

Fair value of assets purchased and liabilities assumed	December 31,
	2003			2002
	Dako- Galant, Panta-Hurt & Multi-Ex			AGIS, Damianex & Onufry
Current Assets
Cash and cash equivalents	$	718			—
Accounts receivable, net of allowance for doubtful accounts		18,407			15,073
Inventories		6,548			7,675
Prepaid expenses and other current assets		753			1,111
Deferred income taxes		936			63
Total Current Assets		27,362			23,922
Equipment, net		1,881			2,603
Total Assets	$	29,243		$	26,525
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Trade accounts payable	$	26,494			16,426
Bank loans and overdraft facilities		3,070			5,020
Income taxes payable		46			—
Taxes other than income taxes		383			745
Other accrued liabilities		2,099			444
Total Current Liabilities		32,092			22,635
Long-term debt, less current maturities		446			—
Net identifiable assets and liabilities		(3,295	)		3,890
Goodwill on acquisition		9,777			14,128
Consideration paid, satisfied in shares		(1,890	)		(4,332	)
Consideration paid, satisfied in cash		(4,592	)		(13,686	)
Cash (acquired)	$	718		$	—
Net Cash Outflow	$	3,874		$	13,686

The Company’s carrying value of goodwill is approximately $35.60 million at December 31, 2003 and is attributable to its only reporting unit (wholesale spirit division). The Company has completed its impairment review of goodwill and as a result concluded that there is no impairment to be recognized at December 31, 2003.

With the adoption SFAS No. 142, the Company ceased amortization of goodwill as of January 1, 2002. Had the Company been accounting for its goodwill under SFAS No. 142 for all periods presented, the Company’s net income and earnings per share would have been as follows:

48

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

	Year Ended December 31,
	2003		2002		2001
Reported net income	$	15,075	$	8,300	$	2,526
Goodwill amortization		—		—	$	498
Adjusted net income	$	15,075	$	8,300	$	3,024
Basic earnings per share of common stock
Reported net income	$	1.48	$	1.03	$	0.39
Goodwill amortization	$	0.00	$	0.00	$	0.07
Adjusted basic earnings per share of common stock	$	1.48	$	1.03	$	0.46
Diluted earnings per share of common stock
Reported net income	$	1.44	$	0.99	$	0.38
Goodwill amortization	$	0.00	$	0.00	$	0.07
Adjusted diluted earnings per share of common stock	$	1.44	$	0.99	$	0.45

Acquisitions

Overview

The Company’s strategy and objectives regarding its acquisition policy are to acquire regionally strong alcohol distributors in order to build market share and construct a nationwide distribution network in order to attract and retain national clients and to strengthen its buying leverage. The price paid by the Company in making its acquisitions is based on earnings projections of the acquired company operating under the Company’s business model.

Name of Subsidiary	Year Acquired	Number of shares issued	Consideration in shares	Consideration in cash	Fair value of net assets acquired		Gross Goodwill
MTC	1999	254,230	1,819,800	2,914,900	2,846,000			2,912,700
PHA	2000	268,126	1,505,000	4,000,000	15,000			5,490,000
Astor	2001	135,691	1,684,000	1,861,600	15,000			3,530,600
AGIS	2002	172,676	2,171,000	4,762,000	374,000			6,559,000
Damianex	2002	152,996	1,781,000	7,359,000	3,167,000			5,973,000
Onufry	2002	64,585	635,994	1,565,000	349,000			1,851,994
Dako-Galant	2003	20,853	411,514	1,401,000	(672,000	)		2,484,514
Panta-Hurt	2003	29,367	609,308	1,453,000	502,000			1,560,308
Multi-Ex	2003	25,000	869,650	1,738,200	(3,125,000	)		5,732,850
Total Gross Goodwill (historical)							$	36,102,966
Cumulative impact of foreign exchange rates								204,706
Total Gross Goodwill as reported							$	36,307,672

49

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

Assuming consummation of the Dako-Galant, Panta-Hurt and Multi-Ex acquisitions and the issuance of common shares as of January 1, 2001, the un-audited pro-forma consolidated operating results for 2001, 2002 and 2003 would be as follows:

	2003		2002		2001
Net sales	$	516,234	$	500,810	$	515,674
Net income		10,811		9,367		6,144
Net income per share data:
Basic earnings per share of common stock	$	1.06	$	1.12	$	0.88
Diluted earnings per share of common stock	$	1.03	$	1.09	$	0.86

7. Equipment

Equipment, presented net of accumulated depreciation in the consolidated balance sheets, consists of:

	Land & Buildings		Motor Vehicles		Motor Vehicles Under Capital Leases		Plant & Equip’t		Computer Hardware & software	Total
Acquisition Cost
Balance as at December 31, 2002	1,973		4,322		1,133		2,977		313	$	10,718
Effects of foreign exchange movement	129		192		95		127		11		554
Acquisition through business combinations	922		2,210		17		825		—		3,974
Cash expenditures	478		880				75		859		2,292
Capitalization of finance leases	—		—		2,098		—		—		2,098
Disposals	(17	)	(1,248	)	(504	)	(497	)	—		(2,266	)
Balance as at December 31, 2003	3,485		6,356		2,839		3,507		1,183		17,370
Cumulative Depreciation
Balance as at December 31, 2002	543		2,420		252		1,546		47		4,808
Effects of foreign exchange movement	34		153		16		98		3		304
Acquisition through business combinations	24		1,330		2		737		—		2,093
Depreciation charge	43		645		352		386		246		1,672
Disposals	(4	)	(887	)	(275	)	(456	)	—		(1,622	)
Balance as at December 31, 2003	640		3,661		347		2,311		296		7,255
Net book value December 31, 2002	1,430		1,902		881		1,431		266		5,910
Net book value December 31, 2003	2,845		2,695		2,492		1,196		887		10,115

50

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

8. Bank Loans and Overdraft Facilities

The Company has banking facilities with six banks which are used to support both the Company’s acquisition strategy and its Cash on Delivery (COD) vodka purchasing requirements. The credit lines are denominated in various currencies as follows:

	December 31,
	2003		2002
USD	$	—	$	744
PLN		30,967		29,624
	$	30,967	$	30,368

These facilities are disclosed in the financial statements as:

	December 31, 2003		December 31, 2002
Overdrafts	$	23,184	$	12,289
Short term debt		7,257		8,064
Long term debt—Current portion		29		3,820
Total long term debt less current portion		497		6,195
Total	$	30,967	$	30,368

Principle repayments for the followings years	December 31,
2004	$	30,441
2005		29
2006		497
Total	$	30,967

During the fourth quarter of 2003, the Company secured group facilities with one of Poland’s leading banks so as to improve cash management throughout the group. This facility was used to consolidate our banking relationship to six banks. This action increased total facilities to approximately $48.5 million. The overdraft and short term loan facilities are subject to renewal between April and December 2004 and the Company does not foresee any difficulties in successfully renegotiating them.

During the fourth quarter of 2002, the Company made the decision that with domestic Polish interest rates continuing to fall and the uncertainty on the foreign currency markets that the Company’s best interest would be served by transferring approximately 98% of its term debt into Polish denominated debt. The weighted average interest charge on all bank loans and overdraft facilities was 8.2% and 7.4% for December 31, 2003 and 2002, respectively.

51

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

9. Lease Obligations

In November 2000, the Company entered into a non cancelable operating lease, for its main warehouse and office in Warsaw, which stipulated monthly payments of $130,000 for five years, this lease cannot be terminated. In February 2003, the Company renegotiated this lease by signing a seven-year agreement starting from May 1, 2003 at a lower rent of $96,000 per month. The following is a schedule by years of the future rental payments under the non-cancelable operating lease as of December 31, 2003.

2004	$	1,152
2005		1,152
2006		1,152
2007		1,152
2008		1,152
Thereafter		1,752
	$	7,512

The Company also has rental agreements for all of the regional offices and warehouse space. Monthly rentals range from approximately $2,000 to $11,670. All of the regional office and warehouse leases can be terminated by either party within two or three month’s prior notice. The retail shop lease has no stated expiration date, but can be terminated by either party with three months prior notice.

The rental expense incurred under operating leases during 2003, 2002 and 2001 was as follows:

	2003		2002		2001
Rent expense	$	3,700	$	3,211	$	2,583

During 2002, the Company continued its policy of renewing its transportation fleet by way of capital leases. The future minimum lease payments for the assets under capital lease at December 31, 2003 are as follows:

2004	$	1,391
2005		1,273
	$	2,664
Less interest		209
	$	2,455

52

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

10. Earnings per share

The following table sets forth the computation of basic and diluted earnings per share for the periods indicated.

	2003		2002		2001
Basic:
Net income	$	15,075	$	8,300	$	2,526
Weighted average shares of common stock outstanding		10,178		8,082		6,539
Basic earnings per share	$	1.48	$	1.03	$	0.39
Diluted:
Net income	$	15,075	$	8,300	$	2,526
Weighted average shares of common stock outstanding		10,178		8,082		6,539
Net effect of dilutive employee stock options based on the treasury stock method		320		243		81
Net effect of dilutive stock options—based on the treasury stock method in regards to IPO options/warrants, contingent shares from acquisition and options issued to consultants		—		32		51
Totals		10,498		8,357		6,671
Diluted earnings per share	$	1.44	$	0.99	$	0.38

Options compensation to consultants, contingent shares for acquisitions and employee stock options granted have been included in the above calculations of diluted earnings per share since the exercise price is less than the average market price of the common stock during portions of 2003. The warrants granted to the underwriters in connection with the Company’s initial public offering were all exercised during 2002.

In May 2003, the Company executed a 3 for 2 stock split. The comparatives for 2002 and 2001 shown above have been adjusted to reflect this change.

11. Financial Instruments, Commitments and Contingent Liabilities

Financial Instruments and Their Fair Values

Financial instruments include cash and cash equivalents, accounts receivable, certain other current assets, trade accounts payable, overdraft facilities and other payables. These financial instruments are disclosed separately in the consolidated balance sheets and their carrying values approximate their fair market values. Financial instruments are denominated in stable currencies and they are of a short-term nature whose interest rates approximate current market rates.

53

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable from Polish companies. Credit is given to customers only after a thorough review of their credit worthiness. The Company does not normally require collateral with respect to credit sales. The Company routinely assesses the financial strength of its customers. As of December 31, 2003 and 2002, the Company had no significant concentrations of credit risk. The Company has not experienced large credit losses in the past. The Company restricts temporary cash investments to financial institutions with high credit ratings.

Inflation and Currency Risk

The Polish government has adopted policies that in recent years have lowered and made more predictable the country’s level of inflation. The annual rate of inflation was approximately 3.6% in 2001, 1.1% in 2002 and 1.7% in 2003. During the year ended December 31, 2003 the Polish zloty has strengthened against the U.S. Dollar by over 3% finishing the year at 3.7405 compared with 3.8388 at the end of 2002.

Supply contracts

The Company has various agreements covering its sources of supply, which, in some cases, may be terminated by either party on relatively short notice. Thus, there is a risk that a portion of the Company’s supply of products could be curtailed at any time.

In 2003, over 5% of the Company’s net sales resulted from sales of products purchased from the following companies: Polmos Bialystok (17%), Sobieski Distribution (14%), Unicom Bols Group (13%), and Polmos Zielona Gora (6%).

Contingent liabilities

The Company is involved in litigation from time to time and has claims against it in connection with matters arising in the ordinary course of business. In the opinion of management, the outcome of these proceedings will not have a material adverse effect on the Company’s operations.

During 2003, the Company received a decision regarding a tax dispute in one of its subsidiaries which resulted in additional tax payable of $146,000. The Subsidiary is still disputing the basis of the decision though should it fail to successfully argue its case there is a risk of a subsequent adjustment totaling $181,000.

12. Related Party Transactions

The Company rents retail space under a short-term rental agreement from the Company’s President. The rent is $2,200 per month. The total rental expense incurred during 2003 was $13,200, and for 2002 it was $26,400. The property was sold by the Company’s President in June 2003.

The Company uses training services provided by a company part owned by the Company’s chief financial officer. The value of services bought during 2002 was $8,000, and no services were provided in 2003. The Company also rented office space to this training company and received rent payments totaling $11,520 during 2002 and zero for 2003.

Two of the group’s subsidiaries, Carey Agri and PWW, act as importers for the groups range of exclusive fine wines, spirits and beers. These products are then sold to other subsidiaries for eventual distribution throughout our national network. These inter-company sales are eliminated as part of the consolidation process but for the year ended December 31, 2003, they amounted to approximately $12.9 million. As at December 31, 2003, the inter-company balances relating to these sales amounted to approximately $6 million, however this too was also eliminated as part of the consolidation process.

54

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

13. Stock Option Plans and Warrants

The Company has elected to follow APB 25 and related Interpretations for its employee stock options because the alternative fair value accounting provided for under FASB Statement 123 requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, no compensation expense is recognized when the exercise price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant.

The Company’s 1997 Stock Incentive Plan (“Incentive Plan”) provides for the grant of stock options, stock appreciation rights, restricted stock and restricted stock units to directors, executives, and other employees (“employees”) of the Company and to non-employee service providers of the Company. Following a shareholder resolution on April 2003 and the stock split of May 2003, the Incentive Plan authorizes, and the Company has reserve for future issuance, up to 2,625,000 shares of Common Stock (subject to anti-dilution adjustment in the event of a stock-split, re-capitalization, or similar transaction). The Compensation Committee of the Board of Directors of the Company administers the Incentive Plan.

The Company also operates an Executive Bonus Plan under which officers of the Company are awarded stock options after achievement of agreed earnings targets. The number of stock options granted is based on the operating results achieved in the year prior to the date of the grant. The stock option price is based on the fair market value of the Common Stock on the date of grant.

The option exercise price for stock options granted under the Incentive Plan may not be less than fair market value but in some cases may be in excess of the Common Stock on the date of grant. The Company uses the stock option price based on the closing price of the Common Stock on the day before the date of grant if such price is not materially different than the opening price of the Common Stock on the day of the grant. Accordingly, there is no compensation expense recorded for options granted under the Incentive Plan to employees. Stock options may be exercised up to 10 years after the date of grant except as otherwise provided in the particular stock option agreement. Payment for the shares must be by cash, which must be received by the Company prior to any shares being issued. Stock options granted vest immediately for grants to Board members, when they are elected to the Board. Stock options granted as part of an employee employment contract vest after 12 months. Stock options granted as part of a loyalty program vest after three years.

Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of Statement 123. The fair value of these stock options were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2001, 2002, and 2003, respectively: risk-free interest rate of 5.5%, 1.9%, and 1.9% dividend yields of 0.0%; volatility factors of the expected market price of the Company’s common stock of 0.68, 1.05, and 1.25; and a weighted-average expected life of the option of 3.4 years. The above amounts represent subjective estimates which are based on historical data and are deemed to be appropriate by the company.

55

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma information follows:

	2003		2002		2001
Net income as reported	$	15,075	$	8,300	$	2,526
Pro forma net income	$	11,973	$	7,165	$	2,155
Pro forma earnings per share:
Basic	$	1.18	$	0.88	$	0.33
Diluted	$	1.14	$	0.86	$	0.33

A summary of the Company’s stock option activity, and related information for the years ended December 31 follows:

Employees and Insiders Only

	Options					Weighted-Average Exercise Price
	2003		2002		2001	2003		2002		2001
Outstanding at January 1,	654,750		568,125		395,625	$	5.21	$	3.59	$	3.22
Granted	367,900		267,375		172,500	$	25.24	$	7.89	$	4.43
Exercised	(283,750	)	(142,875	)	—	$	5.07	$	3.73		—
Forfeited	(14,250	)	(37,875	)	—		—	$	5.37		—
Outstanding at December 31,	724,650		654,750		568,125	$	22.18	$	5.21	$	3.59
Exercisable at December 31,	412,250		420,750		451,500	$	6.27	$	4.69	$	3.47
Weighted-average fair value of options granted	85,250		267,375		172,500	$	1.71	$	7.33	$	3.69

Total Options	Options						Weighted-Average Exercise Price
	2003		2002		2001		2003		2002		2001
Outstanding at January 1,	737,250		680,625		583,125		$	5.45	$	3.71	$	3.72
Granted	367,900		327,375		195,000		$	25.24	$	7.93	$	4.51
Exercised	(366,250	)	(232,875	)	(97,500	)	$	5.60	$	3.89	$	5.33
Forfeited	(14,250	)	(37,875	)	—			—	$	5.37		—
Outstanding at December 31,	724,650		737,250		680,625		$	22.50	$	5.45	$	3.71
Exercisable at December 31,	412,250		420,750		451,500		$	6.14	$	5.13	$	3.65
Weighted-average fair value of options granted	85,250		267,375		172,500		$	1.71	$	7.35	$	3.78

During 2001, 2002, and 2003, respectively, the range of exercise prices were $2.33 to $4.50; $7.73 to $10.84; and $12.34 to $37.59. During 2001, 2002, and 2003, respectively, the weighted average remaining contractual life of options outstanding were 8 years; 7 years; and 5 years. Exercise prices for options outstanding as of December 31, 2003 ranged from $2.67 to $29.65. The weighted average remaining contractual life of those options is 5 years.

56

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

For stock options granted to non-employee service providers, the Company accounted for these grants in accordance with the fair value method in Statement 123. The fair value of these stock options were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2001, 2002, and 2003, respectively: risk-free interest rate of 5.5%, 1.9%, and 1.9%; dividend yields of 0.0%; volatility factors of the expected market price of the Company’s common stock of 0.68, 1.05. and 1.25; and a weighted-average expected life of the option of 3.4 years. During 2001, a total of $74,000 was treated as a deferred cost in anticipation of the Company’s planned Placement in Private Equity which occurred in 2002. During 2002, a total of $306,000 was treated as a cost of raising capital in its Placement in Private Equity and therefore charged to additional paid-in-capital. No options were granted to outside consultants during 2003.

During April of 2002, 30,000 stock options (adjusted for May 2003 stock split) were granted to certain officers of the Company. Under these grants, the option holder was to receive a fixed number of stock options with an option price fixed at the date of grant only if certain earnings before income tax targets were achieved. Such grants are considered as variable under APB 25. In November of 2002, the Company rescinded these variable stock option grants replacing them with a cash bonus plan based on certain earnings before income tax targets being achieved in 2002. Additional stock options were not awarded to the impacted officers.

14. Shareholders Equity

Treasury Stock

On November 27, 2000, the Company’s Board of Directors authorized a share repurchase program to buy up to 300,000 shares in the open market. The Company repurchased 96,150 shares in 2000 and 13,200 shares in the 2001 in open market for an aggregate cost of $150,000 through December 31, 2001. These shares have been treated as treasury stock. All share quantities have been adjusted for the stock split which occurred in May 2003.

Dividend Policy

The Company has instituted a policy of having all of its subsidiaries (except Carey Agri) pay dividends to their respective shareholders, either the Company or Carey Agri. The subsidiaries, except for Carey Agri, will distribute 50% of their respective current years after tax profits except for those generated during the first year of ownership. The retained earnings prior to January 1, 2001 are not considered distributable. As at December 31, 2003, the Company’s subsidiaries, will provide for dividends of approximately $5,395,500 to Carey Agri and the Company. Based upon on the Company’s shareholdings CEDC will receive $925,900 and Carey Agri $4,469,600.

Redeemable Stock

Certain common stock issued in connection with the acquisition of Damianex was subject to a put option, which allows the seller to require the Company to repurchase the shares at $12.00 per share during the period between April 25, 2003 and April 29, 2003. The common stock attributable to this option has been classified as redeemable common stock at an amount of $12.00 per share ($1,781,000). The Put option expired unexercised on April 29, 2003 and the liability was transferred to shareholder equity.

Restricted Stock

The Company issues common stock as part of the consideration given in connection with its acquisitions. These securities are issued in private placements and are not publicly tradable. In addition, the recipients of these securities generally agree to contractual lock-up periods ranging from six months to three years, and the certificates representing these securities bear restrictive legends setting forth the restrictions on transfer. If the holder of these securities satisfies the holding period under Rule 144 of the Securities Act 1933 and

57

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

the lock-up period has expired, counsel for the Company will render an opinion to the transfer agent advising that the certificate representing the restricted securities can be reissued without restrictive legend.

15. Derivative financial instruments

Effective January 1, 2001, the Company adopted SFAS 133, which establishes accounting and reporting standards for derivative instruments. All derivatives, whether designated as hedging relationships or not, are required to be recorded on the balance sheet at fair value. The Company uses derivatives to moderate the financial market risks of its business operations. Derivative products such as forward contracts are used to hedge the foreign currency market exposures underlying certain liabilities with financial institutions. The Company’s accounting policies for these instruments are based on its designation of these instruments as hedging transactions. An instrument is designated as a hedge based in part on its effectiveness in risk reduction and one-to-one matching of derivatives with the related balance sheet risk.

The Company has designated forward contracts as fair value hedges (i.e., hedging the exposure to changes in the fair value of the foreign denominated bank loans), the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in earnings in the current period.

The adoption of SFAS 133 on January 1, 2001, resulted in no cumulative adjustment to the financial statements.

For currency forward contracts, effectiveness is measured by using the forward-to-forward rate compared to the underlying economic exposure. The Company’s hedging policy was considered highly effective for the period in which the Company undertook hedging activities.

During the fourth quarter, the Company converted approximately 98% of its U.S. Dollar and EURO denominated debt into Polish zloty denominated debt and as a result the use of currency forward contracts was no longer necessary. As a result as at December 31, 2002 and 2003, there were no open forward contracts.

	2003		2002			2001
Net gains/(losses) recognized in income statement for years ended December 31,	$	—	$	(180,700	)	$	(334,224	)

58

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Monetary amounts in columns expressed in thousands

(except per share information)

16. Subsequent events

There were no material events subsequent to December 31, 2003.

17. Quarterly financial information (Un-audited)

The following information has been derived from unaudited consolidated financial statements that, in the opinion of management, include all normal recurring adjustments necessary for a fair presentation of such information.

	First Quarter						Second Quarter						Third Quarter						Fourth Quarter
	2003			2002			2003			2002			2003			2002			2003			2002
Net Sales	$	79,468		$	42,650		$	105,122		$	71,458		$	104,844		$	66,508		$	139,684		$	113,349
Seasonality		18.5	%		14.5	%		24.5	%		24.3	%		24.4	%		22.6	%		32.6	%		38.6	%
Gross Profit		10,483			5,879			13,616			9,525			13,486			8,428			18,895			15,056
Gross Margin		13.2	%		13.8	%		13.0	%		13.3	%		12.9	%		12.7	%		13.5	%		13.3	%
Operating Income		3,140			1,298			5,148			3,158			4,929			1,766			8,950			6,392
Net Income	$	1,917		$	782		$	3,459		$	1,941		$	3,604		$	1,017		$	6,095		$	4,561
Net Income per Common Share—Diluted	$	0.21		$	0.12		$	0.33		$	0.24		$	0.34		$	0.12		$	0.56		$	0.50

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

PricewaterhouseCoopers Sp. z o.o. was engaged by the Company on March 18, 2003 to replace Ernst & Young Audit Sp. z o.o. (“E&Y”) as the Company’s independent public accountants. The decision to change accountants was recommended by the Audit Committee and approved by the Board.

E&Y’s reports on the Company’s financial statements for 2002 and 2001 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During 2002 and 2001, there were no disagreements with E&Y on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which if not resolved to the satisfaction of E&Y, would have caused them to make reference thereto in their reports on the financial statements for such years.

The Company provided E&Y with a copy of the foregoing disclosures and filed a copy of E&Y’s letter, dated March 28, 2003, stating that it found no basis for disagreement with such statements, with the Securities and Exchange Commission.

Item 9A. Control and Procedures.

CEO and CFO Certifications. Exhibits 31.1 and 31.2 of this annual report are the certifications of the CEO and the CFO required by Rules 13a-14 and 15d-14 the Securities Exchange Act of 1934 (the “Certifications”). This section of the annual report contains the information concerning the evaluation of Disclosure Controls and changes to Internal Controls referred to in the Certifications and this information should be read in conjunction with the Certifications for a more complete understanding of the topics presented.

Disclosure Controls and Internal Controls. Disclosure Controls are procedures that are designed for the purpose of ensuring that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934 (such as this annual report), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Internal Controls are designed for the purpose of providing reasonable assurance that the Company’s transactions are properly authorized, recorded and reported and that the Company’s assets are safeguarded from improper use to permit the preparation of the Company’s financial statements in conformity with generally accepted accounting principles.

Limitations on the Effectiveness of Controls. The Company’s management, including the CEO and CFO, does not expect that the Company’s Disclosure Controls or Internal Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Further, the design of any control system is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of these inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes to Internal Controls. In accordance with the SEC’s requirements, the CEO and the CFO note that, since the date of their last evaluation, there have been no significant changes in Internal Controls or in other factors that could significantly affect Internal Controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

Conclusions regarding Disclosure Controls. Based upon the required evaluation of Disclosure Controls, the CEO and CFO have concluded that, subject to the limitations noted above, the Company’s Disclosure Controls are effective to ensure that material information relating to the Company and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when the Company’s periodic reports are being prepared.

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PART III

Item 10. Directors and Executive Officers of the Registrant.

The information with respect to our executive officers and directors is incorporated herein by reference to the proxy statement for the annual meeting of stockholders to be held on May 3, 2004.

Item 11. Executive Compensation.

The information with respect to executive compensation is incorporated herein by reference to the proxy statement for the annual meeting of stockholders to be held on May 3, 2004.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The information with respect to security ownership of is incorporated herein by reference to the proxy statement for the annual meeting of stockholders to be held on May 3, 2004.

Item 13. Certain Relationships and Related Transactions.

The information with respect to certain relationships and related transactions is incorporated herein by reference to the proxy statement for the annual meeting of stockholders to be held on May 3, 2004.

Item 14. Principal Accountant Fees and Services.

The information with respect to principal accountant fees and services transactions is incorporated herein by reference to the proxy statement for the annual meeting of stockholders to be held on May 3, 2004.

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PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)(1) The following consolidated financial statements of the Company and report of independent auditors are included in Item 8 of this Annual Report on Form 10-K.

Report of Independent Auditors

Consolidated Balance Sheets at December 31, 2002 and 2003

Consolidated Statements of Income for the years ended December 31, 2001, 2002 and 2003

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31,

2001, 2002 and 2003

Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2002 and 2003

Notes to Consolidated Financial Statements.

(a)(2) Schedules

All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission either have been included in the Company’s consolidated financial statements or the notes thereto, are not required under the related instructions or are inapplicable, and therefore have been omitted.

(a)(3) The following exhibits are either provided with this Form 10-K or are incorporated herein by reference.

Exhibit Number	Exhibit Description
2.1	Contribution Agreement among Central European Distribution Corporation and William V. Carey, William V. Carey Stock Trust, Estate of William O. Carey and Jeffrey Peterson dated November 28, 1997 (filed as Exhibit 2.1 to the Registration Statement on Form SB-2, File No. 333-42387, with the Commission on December 17, 1997 [the “1997 Registration Statement”] and incorporated herein by reference)
2.2	Investment Agreement for Damianex S.A. dated April 22, 2002 (filed as Exhibit 2 to the Current Report on Form 8-K/A filed on May 14, 2002 and incorporated herein by reference)
2.3	Share Purchase Agreement for AGIS S.A. dated April 24, 2002 (filed as Exhibit 2.2 to the Current Report on Form 8-K/A filed on June 3, 2002 and incorporated herein by reference)
2.4	Share Purchase Agreement for Onufry S.A. dated October 15, 2002 between Carey Agri International Poland Sp. z o.o., Central European Distribution Corporation and Zbigniew Trafalski, Henryk Gawin (filed as Exhibit 2.4 to the Annual Report on Form 10-K filed on March 14, 2003 and incorporated herein by reference)
2.5	Share Purchase Agreement for Dako Sp. z o.o. dated April 16, 2003 between Carey Agri International Poland Sp. z o.o., Central European Distribution Corporation and Waclaw Dawidowicz and Mirosław Sokałski (filed as Exhibit 2.1 to the Quarterly Report on Form 10-Q filed on May 14, 2003 and incorporated herein by reference)
2.6	Share Purchase Agreement for Panta Hurt Sp. z o.o. dated September 5, 2003 between Carey Agri International Poland Sp. z o.o., Central European Distribution Corporation and Wlodzimierz Szydlarski, Sylwester Zakrzewski and Wojciech Piatkowski (filed as Exhibit 2.6 to the Quarterly Report on Form 10-Q filed on November 14, 2003 and incorporated herein by reference)

Exhibit Number	Exhibit Description
2.7	Share Purchase Agreement for Multi-Ex S.A. dated November 14, 2003 between Carey Agri International Sp. z o.o. and Piotr Pabianski and Ewa Maria Pabianska
2.8	Share Purchase Agreement for Multi-Ex S.A. dated November 14, 2003 between Central European Distribution Corporation and Piotr Pabianski
2.9	Share Purchase Agreement for Multi-Ex S.A. dated December 18, 2003 between Central European Distribution Corporation and Piotr Pabianski
3.1	Certificate of Incorporation (filed as Exhibit 3.1 to the 1997 Registration Statement and incorporated herein by reference)
3.2	Amended and Restated Bylaws
4.1	Form of Common Stock Certificate (filed as Exhibit 4.1 to the 1997 Registration Statement and incorporated herein by reference)
10.1	1997 Stock Incentive Plan as amended (filed as Exhibit A to the definitive Proxy Statement as filed with the Securities and Exchange Commission on April 1, 2003 and incorporated herein by reference)
10.2	Employment agreement with William V. Carey and CEDC dated as of August 1, 2001 (filed as Exhibit 10.2 to the Annual Report on Form 10-K filed on March 15, 2002 and incorporated herein by reference)
10.3	Employment Agreement dated June 8, 2000 between William V. Carey and Carey Agri International Poland Sp. z o.o. (filed as Exhibit 10.15 to the Annual Report on Form 10-K filed on March 14, 2003 and incorporated herein by reference)
10.4	Employment agreement with Neil Crook and Carey Agri International Poland Sp. z o.o. (filed as Exhibit 10.4 to the Annual Report on Form 10-K filed on March 15, 2002 and incorporated herein by reference)
10.5	Employment Agreement dated as of February 7, 2003 by and between the Company and Neil Crook (filed as Exhibit 10.14 to the Annual Report on Form 10-K filed on March 14, 2003 and incorporated herein by reference)
10.6	Employment agreement with Evangelos Evangelou and Central European Distribution Corporation dated September 16, 2001 (filed as Exhibit 10.5 to the Annual Report on Form 10-K filed on March 15, 2002 and incorporated herein by reference)
10.7	Employment Agreement dated September 20, 2002 between Carey Agri International Poland Sp. z o.o. and Evangelos Evangelou and annex dated January 1, 2003 to Employment Agreement between the Company and Evangelos Evangelou dated September 16, 2001 (filed as Exhibit 10.16 to the Annual Report on Form 10-K filed on March 14, 2003 and incorporated herein by reference)
10.8	Employment Agreement dated as of October 1, 2001 by and between the Company and James Archbold (filed as Exhibit 10.13 to the Annual Report on Form 10-K filed on March 14, 2003 and incorporated herein by reference)
10.9	Executive Bonus Plan (filed as Exhibit 10.6 to the Annual Report on Form 10-K filed on March 15, 2002 and incorporated herein by reference)
10.10	Lease Agreement for warehouse at Bokserska Street 66a, Warsaw, Poland (filed as Exhibit 10.15 to the Current Report on Form 8-K filed on April 16, 2001 and incorporated herein by reference)
10.11	Annex 2 to Lease Agreement dated February 19, 2003 for warehouse at Bokserska Street 66a, Warsaw, Poland
21	Subsidiaries of the Company

Exhibit Number	Exhibit Description
23.1	Consent of PricewaterhouseCoopers Sp. z o.o.
23.2	Consent and Opinion of Ernst & Young Audit Sp. Z o. o.
31.1	Certificate of the CEO pursuant to Rule 13a-15(e) or Rule 15d-15(e)
31.2	Certificate of the CFO pursuant to Rule 13a-15(e) or Rule 15d-15(e)
32.1	Certification of the CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on form 8-K in the last quarter of 2003

No Current Reports on Form 8-K were filed by the Company in the last quarter of 2003.

(c) Exhibits

The response to this portion of Item 15 is submitted in the response to Item 15(a)(3).

(d) Financial Statement Schedules

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CENTRAL EUROPEAN DISTRIBUTION CORPORATION (Registrant)
By:	/s/    WILLIAM V. CAREY
	William V. Carey Chairman, President and Chief Executive Officer

Date: March 15, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    WILLIAM V. CAREY         William V. Carey	Chairman, President and Chief Executive Officer (principal executive officer)	March 15, 2004
/s/    NEIL CROOK         Neil Crook	Vice President and Chief Financial Officer (principal financial and accounting officer)	March 15, 2004
/s/    DAVID BAILEY         David Bailey	Director	March 15, 2004
/s/    N. SCOTT FINE         N. Scott Fine	Director	March 15, 2004
/s/    TONY HOUSH         Tony Housh	Director	March 15, 2004
/s/    ROBERT P. KOCH         Robert P. Koch	Director	March 15, 2004
/s/    JAN W. LASKOWSKI         Jan W. Laskowski	Director	March 15, 2004
/s/    RICHARD ROBERTS         Richard Roberts	Director	March 15, 2004

EX-2.7

Exhibit 2.7

SHARE SALE AGREEMENT

This conditional share sale agreement (hereinafter the “Agreement”) was entered into on 14 November 2003, by and between:

Carey Agri International Poland Sp. z o.o., with registered office in Warsaw at ul. Bokserska 66A, represented by Mr. Evangelos Evangelou and Mr. Neil Crook, hereinafter referred to as the “Buyer”.

and

Mr. Piotr Pabianski, residing in Kalisz at ul. Szeroka 37-39, holder of the Polish identity document No. ACK 747347, and

Mrs. Ewa Maria Pabianski, residing in Kalisz at ul. Szeroka 37-39, holder of the Polish identity document No. ACW 628365, represented by Mr. Piotr Pabianski, hereinafter jointly referred to as the “Seller”. The power of attorney granted to Mr. Piotr Pabianski constitutes Schedule 1 .

WHEREAS

A. The Seller is the owner of all shares in “MULTI-EX” Spółka Akcyjna, with registered office in Kalisz, entered in the register of entrepreneurs of the Polish Court Register maintained by the District Court in Poznan, 22^nd Commercial Register, under number KRS 0000034424 (hereinafter referred to as the “Company”).

B. The Seller agreed to sell to the Buyer all shares in the Company held by the Seller, representing 100% of the Company’s share capital, i.e., 20,408 (twenty thousand four hundred and eight) shares, including 10,000 (ten thousand) series A ordinary registered shares and 10,408 (ten thousand four hundred and eight) series B ordinary bearer shares, each share of the value of PLN 10 (ten) (hereinafter referred to as the “Shares”).

C. The Buyer agreed to purchase the Shares in the Company, provided, in particular, that they are free and clear of any encumbrances and rights of third parties and that the Company is not the owner or perpetual usufructuary of any real properties.

1. DEFINITIONS

Unless the context hereof provides otherwise, capitalised terms not defined otherwise in this Agreement shall have the following meaning:

“Party”, “Parties”	means the Seller or the Buyer, respectively;
“Series A Shares”	mans 10,000 (ten thousand) series A ordinary registered shares in the Company, each of the nominal value of PLN 10 (ten), registered under numbers from 00001 to 10000;
“Series B Shares”	means 10,408 (ten thousand four hundred and eight) series B ordinary bearer shares in the Company, each of the nominal value of PLN 10 (ten);
“Price”	means the total price for the Shares in the Company, set forth in Item 3.1 hereof;

“Real Property KW 40964”	- means the real property situated in Kunice, of the area of 66,800 square metres, for which the District Court in Legnica maintains land and mortgage register KW 40964;
“Real Property KW 100399”	- means the real property situated in Białe Błota, of the area of 2,529 square metres, for which the District Court in Bydgoszcz maintains land and mortgage register KW 100399;
“Real Property KW 14731”	- means the real property situated in Kalisz at ul. Skarszewska 2, of the area of 785 square metres, for which the District Court in Kalisz maintains land and mortgage register KW 14731;
“Company’s Real Properties”	- means the Real Property KW 14731, Real Property KW 100399 and Real Property KW 40964;

2. SALE AND PURCHASE OF SHARES

2.1. The Seller hereby represents that he sells the Shares to the Buyer for the price set forth in Item 3.1 of the Agreement, and the Buyer represents that it purchases the Shares from the Seller for the above price.

2.2. The transfer of the Series A Shares and Series B Shares to the Buyer, together with the transfer of possession of these Shares to the Buyer shall be effected at the moment of execution of this Agreement. The Parties mutually represent that in connection with the pledge established on the Shares, Series B shares are held by the Buyer in dependant possession.

2.3. The price for the Shares shall be paid in accordance with Item 3.2 hereof.

2.4. The Shares shall be transferred to the Buyer together with all rights underlying the Shares, free and clear of any pledges (except for pledge established in favour of the Buyer), liens, obligations or rights of third parties. In particular, upon the transfer of the Shares to the Buyer, the right to profit in the Company for 2003 and for previous years shall be transferred to the Buyer.

2.5. The Buyer shall notify the Company of the purchase of the Shares and the establishment of dominant relationship.

3. PRICE FOR THE SHARES

3.1. The Price for the Shares shall be equal to the product of the number of Shares and the price per Share. The total price for all the Shares shall amount to 6,450,000 (six million four hundred fifty thousand).

3.2. Considering existing debts of Mr. Piotr Pabianski towards third parties, the Parties agree that immediately after the transfer of the Shares to the Buyer, together with the transfer of possession of the Shares, the Buyer shall pay the Price for the Shares to the Seller, by wire transfer to the following bank accounts designated by the Seller:

3.2.1. PLN 2,550,000.00 (two million five hundred fifty thousand) shall be paid to the following bank account of Mr. Zdzisław Dalecki (in connection with the purchase of series B shares before the transaction):

ABN AMRO Bank Polska S.A.

No.: 16700004 – 643991058141;

2

3.2.2. PLN 2,450,000.00 (two million four hundred fifty thousand) shall be paid to the following bank account of Mrs. Ewa Maria Pabianska:

Euro Bank Spółka Akcyjna O/Wrocław

No.: 41 1470 0002 2162 0029 7468 001;

3.2.3. PLN 280,000.00 (two hundred eighty thousand) to the following bank account of the Company (repayment of the loan extended to “Prohibicja” S.A.):

Bank Handlowy w Warszawie S.A. O/Kalisz

No.: 10301146-00152202;

3.2.4. PLN 266,765.45 (two hundred sixty-six thousand seven hundred sixty-five and 45/1000) to the bank account of the Company (repayment of interest on the loan extended to “Prohibicja” S.A.):

Bank Handlowy w Warszawie S.A. O/Kalisz

No.: 10301146-00152202; and

3.2.5. PLN 903,234.55 (nine hundred three thousand two hundred thirty-four and 55/100) to the bank account of the Company (repayment of part of loan extended to Mr. Piotr Pabianski):

Bank Handlowy w Warszawie S.A. O/Kalisz

No.: 10301146-00152202.

3.3. The Buyer’s payment of the Price for the Shares to the bank accounts specified in Item 3.2.1-3.2.5 shall satisfy the Seller.

4. REPRESENTATIONS AND WARRANTIES OF THE SELLER

4.1. The Seller hereby represents and warrants to the Buyer that each of the representations and warranties specified below is true, accurate and fair:

4.1.1. The Company has been duly organized and validly exists under the laws of the Republic of Poland. The current excerpt from the National court Register is attached as Schedule 2 to this Agreement. The current uniform text of the Company’s Articles of Association is attached as Schedule 3 to this Agreement.

4.1.2. The share capital of the Company amounts to PLN 204,080 (two hundred four thousand and eighty) and is divided into 20.408 (twenty thousand four hundred and eight) shares, each of the nominal value of PLN 10 (ten), including 10,000 (ten thousand) series A ordinary registered shares registered under numbers from 1 to 10000, and 10,408 (ten thousand four hundred and eight) series B ordinary bearer shares. Each share gives the right to one vote at the General Meeting of the Company. All Shares are owned by the Seller. There is no other

3

shareholders in the Company. An excerpt from the current share ledger signed by the Management Board of the Company is attached hereto as Schedule 4. The shares have been duly issued and subscribed for or acquired by the Seller.

4.1.3. The Shares have been fully paid up and are free and clear of any pledges, encumbrances, obligations and rights of third parties, except for pledge established in favour of the Buyer. In particular, before the execution of this Agreement the following pledges expired: a) pledge on Series B Shares established in favour of AMBRA S.A.; b) pledges established on the Series A Shares in favour of Bank Handlowy w Warszawie S.A., including: (i) pledge established under the agreement of 11 February 2000 on 4,750 Series A Shares (No. 0251-5000); (ii) registered pledge established under agreement No. 347 of 13 July 2000 and the decision of the competent court on 1,000 Series A Shares (No. 9001-10000), (iii) registered pledge established under agreement of 13 July 2000 and the decision of the competent court on 9,000 Series A Shares (No. 00001-9000); c) pledge established in favour of BRE Bank S.A. on 5,100 Series A Shares (No. 001-100 and No. 5001-10000). The documents confirming expiration of the above pledges are attached in Schedule 5.

4.1.4. There are no restrictions or limitations on the transferability of the Shares. The transfer of the Shares to the Buyer shall not give a legal reason to any third party to terminate any agreements to which the Company is a party. As of the date of this Agreement, the Seller is not aware of any intent of the Company’s suppliers or customers to cease the co-operation with the Company.

4.1.5. The Seller shall have the power and authority to sign this Agreement and to execute the transaction contemplated hereby. The performance of this Agreement and of the obligations set forth herein shall not result in violation of any law, any contract to which the Seller is a party or by which he or his property may be bound, any judgment of any court, or any permit or approval of any governmental agency.

4.1.6. This Agreement constitutes a valid and legally binding obligation of the Seller, enforceable in accordance with its terms.

4.1.7. Except for the claim for payment of the Price for the Shares, the Seller shall waive any claims against the Shares or the assets of the Company.

4.1.8. The Company’s share capital was increased only once, up to PLN 204,080 (two hundred four thousand and eighty). Series B Shares were duly subscribed for, and the increase in the share capital was duly registered by the competent court. There exist no claims of third parties against the Shares or claims connected with the increase on the Company’s share capital.

4.1.9. All resolutions of the Company’s shareholders were adopted correctly from the formal point of view and are legally binding.

4.1.10. The Company does not have any obligations towards its former or existing shareholders. There exist no obligations towards third parties for which the Company would be liable.

4.1.11. Holders of commercial power of attorney of the Company, i.e., Mr. Waldemar Teklak and Mr. Zdzisław Dalecki, were removed in September 2003.

4.1.12. The financial statements of the Company for the year ending 31 December 2002 were drawn up in accordance with the Accounting Law and give a true picture of the Company’s financial standing.

4

4.1.13. The Company has duly filed all tax and social security contribution returns, including but not limited to those relating to income tax and tax on goods and services (VAT), excise duty, wage tax and social security contributions, and paid any and all amounts which were or are due before or upon the signature hereof. There is no outstanding tax or social security contribution to be paid by the Company or its shareholders.

4.1.14. The tax inspections carried out in the Company have not disclosed any irregularities. The Company timely pays all its tax obligations. Certificates issued by the competent Tax Office and the Social Security Office (ZUS) on no arrears of the Company in payment of any taxes of social security contributions are attached hereto as Schedule 6.

4.1.15. Except for the litigation listed in Schedule 7, as of 13 November 2003 the Company is not a party in any civil law proceedings, no proceedings are pending or expected by the Company (including court, enforcement, arbitration, injunction, tax, administrative, bankruptcy or arrangement proceedings or others). As of 13 November 2003 the value of claims pursued by the Company from other entities does not exceed PLN 6.507.830,77 (six million five hundred and seven thousand eight hundred thirty and 77/100). As of 31 October 2001, the value of claims pursued against the Company’s employees does not exceed PLN 596.280,89 (five hundred ninety six thousand two hundred eighty and 89/100). As of 13 November 2003 the value of claims pursued against the Company by other persons in civil law proceedings does not exceed PLN 176,934.93 (one hundred seventy six thousand nine hundred thirty four and 93/100).

4.1.16. The Company has not executed any loan agreements and does not use any loans, except for loans extended by Bank Handlowy w Warszawie S.A. under the revolving loan agreement of 4 February 2000 (No. 97-KNZ-755/01) and working capital loan agreement of 11 February 2000 (No. 97-KBZ-0669/00). The current total indebtedness of the Company under the above loan agreements amounts to PLN 4,993,200. In particular, the Company is not a party to any loan agreement or is not a debtor of Bank Zachodni WBK S.A. or BRE Bank S.A.

4.1.17. The Company has not issued any promissory notes or cheques other than those specified in Schedule 8 hereto.

4.1.18. The Company has not executed any agreements on assignment of its receivables, collateral transfer of ownership or any agreements on establishment of a pledge, including registered pledge, other than the agreements listed in Schedule 9 hereto.

4.1.19. The Company is not a party to any agreement on co-operation of distributors of alcoholic beverages.

4.1.20. The Company is a party to 32 (thirty two) agreements on leasing of transportation vehicles as listed in Schedule 10 hereto. The Company duly performs its obligations under the agreements.

4.1.21. No proceedings have been instituted, aimed at satisfying any creditor in connection with any asset of the Company covered by the security. The Company holds full rights to its assets and property.

5

4.1.22. Agreements executed by the Company are enforceable and legally binding. The list of tenancy (lease) agreements concerning real properties (currently in force) is attached hereto as Schedule 11.

4.1.23. No petition in bankruptcy has been filed against the Company and no arrangement proceedings or proceedings for compulsory management under Article 1062 of the Code of Civil Procedure have been instituted, and no receiver referred to in Article 27 of the Law on Registered Pledge was appointed for the operations of the Company.

4.1.24. The Company received the following permits for wholesale of alcoholic beverages (currently in force):

- permit No. 1240/S/02 of 11 December 2002 for domestic wholesale of alcoholic beverages of the volume over 18%;

- permit No. 33/P/03 of 30 January 2003 r. for domestic wholesale of alcoholic beverages of the volume up to 4.5% and beer; and

- permit No. 32/W/03 of 30 January 2003 for domestic wholesale of alcoholic beverages of the volume over 4.5% up to 18%, excluding beer.

4.1.25. The Company does not violate the terms and conditions of permits listed in the preceding item. In particular, the Company is not involved in trade in alcoholic beverages in locations not listed in the aforementioned permits, and duly pays all fees due on the above permits.

4.1.26. The Company does not have any overdue payments to its employees. Except for claims reported in pending civil law proceedings concerning remuneration for overtime work and damages for ungrounded (in the opinion of claimants) termination of employment contracts for the total amount not higher than PLN 133,472.43 (one hundred thirty-three thousand four hundred seventy-two and 43/100) there exist no claims or bases for any other employee claims, including claims connected with accidents at work or with redundancies.

4.1.27. No proceedings are pending in connection with the existing or former shareholders of the Company or members of its Management Board or the Supervisory Board.

4.1.28. The Company is not an owner (co-owner) or perpetual usufructuary (co-usufructuary) of any real property. The Real Property KW40964, Real Property KW100399 and Real Property KW 14731 were duly sold before the execution of this Agreement. The documents confirming the above disposals shall be attached to this Agreement as soon as possible.

4.1.29. No legal proceedings were pending against the Company’s Real Properties and there existed no grounds for institution of such proceedings. In particular, no third party held any right of first refusal to purchase the Company’s Real Properties and no such right existed upon the purchase of the Company’s Real Properties. Real Property KW 40964 is encumbered with mortgages in favour of Bank Handlowy w Warszawie S.A.: (i) of PLN 5,100,000 (five million one hundred thousand) in connection with the revolving loan of 4 February 2000 and (ii) of PLN 3,000,000 in connection with working capital loan of 11 February 2000. The mortgage of PLN 3,500,000 (three million five hundred thousand) entered in land and mortgage register Kw 40964 as security of repayment of the

6

investment loan with maturity date on 28 September 2001 is inconsistent with the facts and legal standing and should be deleted since the loan has been repaid. There exist no other encumbrances on Real Property KW 40964. Real Property KW 14731 is encumbered with mortgage registered before 1 September 1939 in favour of the enterprise “W. Suwała” in the amount of PLN 12 (twelve).

4.1.30. Within 90 days prior to the execution of this Agreement, the Company was not a party to any transaction of sale or purchase of assets with the Seller or an entity in which the Seller holds shares or other interests, except for the transactions connected with the sale of the Company’s Real Properties.

4.1.31. The Company is not a party to any agreements or transactions with entities related to the Company or with its current or former shareholders, and has not executed any agreements on provision of services with related entities, members of family, relatives or next of kin of the above entities, except for the loan agreement executed with the Seller (loan of PLN 3,200,000) and the loan agreement executed with Prohibicja S.A. (loan of PLN 300,000).

4.1.32. The Company’s property is not rented, leased or let for use to the Sellers or third parties.

4.1.33. The Company is not a shareholder, general partner or limited partner of any civil law partnership or commercial company and does not hold any interests in other entities, except „Społem” BSS in Łódz and Puls sp. z o.o. in Opole. On 9 December 2002 Discrict Court in Opole issued a ruling ending bankruptcy proceedings relating to Puls Sp. z o.o. The Company duly sold the shares in MCM Sp. z o.o. in Kalisz, Rodan Sp. z o.o. in Poznn, Lovico Poland Sp. z o.o. and Partner Sp. z o.o. in Kalisz. Documents confirming the above sales are included in Schedule 12.

4.1.34. The Seller represents that he has disclosed to the Buyer all information, concerning all aspects of the Company’s functioning, that is or may be reasonably deemed necessary for proper evaluation of the Company’s operations, its assets and liabilities, its net equity and its financial standing and sales.

4.2. The Seller is aware that the Buyer enters into this Agreement based on the assumption that the above representations and warranties are complete, fair, accurate and fully true.

4.3. The Seller hereby undertakes to indemnify and hold the Buyer or the Company harmless from any damage caused to third parties or to pay to the Buyer or the Company a compensation for damage suffered by the Buyer or the Company due to the Seller’s violation of any of the representations and warranties listed above (including but not limited to their incompleteness, incorrectness or inaccuracy) or due to the Seller’s violation of any obligations hereunder. In case of gross violation of any of the representations and warranties set forth hereinabove or any other obligations of the Seller, the Seller shall pay the Buyer or the Company a contractual penalty amounting to twice the value of the Price for the Shares. The Buyer or the Company shall have the right to claim damages exceeding the contractual penalty, on general terms.

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5. REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer hereby represents and warrants to the Seller that:

5.1. Carey Agri has been duly organised and validly exists under the laws of Poland and has the right to execute the transaction contemplated hereby.

5.2. The performance of this Agreement and of the obligations set forth herein have been duly authorized by the Buyer and shall not result in violation of any law, or any contract to which the Buyer is a party, or any judgment of any court, or any permit or approval of any governmental agency.

5.3. This Agreement constitutes a valid and legally binding obligation of the Buyer, enforceable in accordance with its terms.

6. COVENANTS

6.1. The Seller shall, for an unlimited period of time, indemnify and hold the Company and/or the Buyer harmless from any payment of tax or debts resulting from any tax inspection or legal proceedings concerning the Company’s activity before the execution of this Agreement.

6.2. Each Party shall keep confidential all information contained in this Agreement. The above undertaking shall not apply to any information which is currently in public domain or the disclosure of which is required by mandatory provisions of laws or necessary for the proper performance of this Agreement.

6.3. The Company shall execute with Mr. Piotr Pabianski an employment contract for a definite period of time, i.e. until 31 December 2004, which constitute Schedule 13.

7. NOTICES

7.1. All notices, statements and communications required or permitted under this Agreement shall be effectively given, if personally delivered or sent by registered mail (return receipt requested) to the following address:

To the Buyer:

Carey Agri International Poland Sp. z o.o.

ul. Bokserska 66A,

02-690 Warszawa, Poland,

Fax: 22 455 18 10

Attention of Mr. William V. Carey.

To the Seller:

Mr. Piotr Pabianski

62-800 Kalisz

ul. Szeroka 37-39

Fax: 62                     

7.2. The Parties undertake to promptly notify one another of the change in the address for correspondence. In the event of failure to notify of the change in the address, all correspondence sent to the addresses indicated above shall be deemed delivered to the appropriate address.

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8. FINAL PROVISIONS

8.1. Any legal, financial and consulting expenses of the Seller in relation to this Agreement shall be borne solely by the Seller. The Buyer shall be responsible for its own expenses.

8.2. The cost of tax on civil law transactions shall be borne by Buyer.

8.3. This Agreement shall remain valid if any part or provision hereof is deemed by a court or other authority invalid or unenforceable in full or in part, unless it follows from the facts that the Parties would not have executed the Agreement if they had been aware of invalidity or enforceability of such part or provision. As regards provisions deemed invalid or unenforceable, the Parties shall negotiate in good faith, as far as feasible, new provisions that will be valid and enforceable and will reflect original intentions of the Parties.

8.4. This Agreement shall be governed by and construed in accordance with the laws of the Republic of Poland.

8.5. Any and all disputes arising in connection with this Agreement shall be settled by the Arbitration Tribunal at the Polish Chamber of Commerce in accordance with its rules. Arbitration proceedings shall be held in Warsaw and shall be conducted in Polish.

8.6. This Agreement has been executed in two counterparts in Polish and English, one counterpart of each language version for each of the Parties. The Polish language version shall be prevailing for the interpretation of the Agreement.

Schedules:

1. Power of attorney.

2. Excerpt from National court Register.

3. Uniform text of the Company’s Statutes.

4. Excerpt from the current share ledger.

5. Documents confirming expiration of pledges.

6. Certificates issued by competent Tax Office and ZUS.

7. List of litigation.

8. List of promissory notes and cheques issued by the Company.

9. List of agreements on collateral transfer of ownership and assignment agreements.

10. Specification of leasing agreements in force.

11. List of tenancy or lease agreements in force.

12. Documents confirming sales of shares.

13. Employment contract.

Seller:
By:	Piotr Pabianski
Buyer:
By:	Evangelos Evangelou
	Neil Crook

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EX-2.8

Exhibit 2.8

AGREEMENT

This agreement (hereinafter referred to as the “Agreement”) was entered into on 14 November 2003, by and between:

Central European Distribution Corporation, with registered office at 1343 Main Street, # 301, Sarasota, Florida 34236, USA, represented by Mr. William V. Carey, hereinafter referred to as “CEDC”

and

Mr. Piotr Pabianski, residing in Kalisz at ul. Szeroka 37-39, holder of the Polish identity document No. AB 7029733, hereinafter referred to as the “Shareholder”.

§ 1

Unless the context hereof provides otherwise, capitalised terms not defined otherwise in this Agreement shall have the following meaning:

“Company”	- means “MULTI-EX” Spółka Akcyjna, with registered office in Kalisz, entered in the register of entrepreneurs of the Polish Court Register maintained by the District Court in Poznan, 22nd Commercial Department of the Polish Court Register, under number KRS 0000034424;
“Shares in the Company”	- means 20,408 shares in the Company, including 10,000 Series A ordinary registered shares and 10,408 series B ordinary bearer shares, each of the nominal value of PLN 10;
“ Shares in CEDC”	- means ordinary shares in CEDC listed on NASDAQ Stock Exchange in the United States of America, in the number set forth herein; and

§ 2

The Shareholder represents that:

a) he is the sole shareholder in the Company;

b) the Company was organised and is run in accordance with applicable provisions of law and, as part of its business, the Company conducts wholesale and retail trade in alcoholic beverages and other beverages (distribution of alcohol);

c) through the sale of the Shares to Carey Agri International Poland Sp. z o.o. the Shareholder consents to joining the transaction, as negotiated with the CEDC Group, which consists in extending the distribution network of the CEDC Group,

d) he managed the Company with due diligence and he made that the Company is able to achieve a certain level of turnover.

§ 3

1. The Parties of this Agreement agrees that for entering the Share Purchase Agreement, signed between the Shareholder and Carey Agri International Poland Sp. Z o.o. (member if CEDC holding) on the November 14^th 2003, CEDC shall issue to the Shareholder 25,000 Shares CEDC.

2. The Shareholder hereby grants to CEDC an irrevocable and non-expiring power of attorney for Mr. William Vernon Carey (the “Attorney”) to undertake any and all actual and legal acts aimed at opening, for and on behalf of the Shareholder, a brokerage account in the Untied States of America, and to use and manage this account in accordance with the provisions hereof.

3. The Parties agree that within 12 months from the date of issuing the CEDC Shares referred to in Section 1 hereof, the Shares in CEDC shall be transferred by the Attorney through an applicable brokerage house in the United States. Funds earned on the sale of the Shares in CEDC shall be transferred to the Company’s bank account in connection with repayment of the loan (plus interest) extended to the Shareholder by the Company.

§ 4

1. The Parties agree that the validity hereof shall be contingent upon the consent of the Management Board of the CEDC capital group.

2. Each Party may terminate this Agreement in case of its breach by the other Party.

3. Each Party shall keep all information contained herein confidential. The above obligation shall not pertain to information that is publicly known and whose disclosure is required by law or for the proper performance hereof.

4. Any disputes arising from this Agreement shall be settled by the court competent for CEDC.

CEDC

Piotr Pabianski

2

EX-2.9

Exhibit 2.9

AGREEMENT

This agreement (hereinafter referred to as the “Agreement”) was entered into on 18 December 2003, by and between:

Central European Distribution Corporation, with registered office at 1343 Main Street, # 301, Sarasota, Florida 34236, USA, represented by Mr. William V. Carey, hereinafter referred to as “CEDC”

and

Mr. Piotr Pabianski, residing in Kalisz at ul. Szeroka 37-39, holder of the Polish identity document No. AB 7029733, hereinafter referred to as the “Shareholder”.

§ 1

Unless the context hereof provides otherwise, capitalised terms not defined otherwise in this Agreement shall have the following meaning:

“Company”	- means “MULTI-EX” Spółka Akcyjna, with registered office in Kalisz, entered in the register of entrepreneurs of the Polish Court Register maintained by the District Court in Poznan, 22nd Commercial Department of the Polish Court Register, under number KRS 0000034424;
“Shares in the Company”	- means 20,408 shares in the Company, including 10,000 Series A ordinary registered shares and 10,408 series B ordinary bearer shares, each of the nominal value of PLN 10;
“ Shares in CEDC”	- means ordinary shares in CEDC listed on NASDAQ Stock Exchange in the United States of America, in the number set forth herein; and

§ 2

The Shareholder represents that:

e) on the 14^th of November 2003, which is a date of signing Share Purchase Agreement between the Shareholder and Carey Agri International Poland Sp. z o.o. he is the sole shareholder in the Company;

f) the Company was organised and is run in accordance with applicable provisions of law and, as part of its business, the Company conducts wholesale and retail trade in alcoholic beverages and other beverages (distribution of alcohol);

g) through the sale of the Shares to Carey Agri International Poland Sp. z o.o. the Shareholder consents to joining the transaction, as negotiated with the CEDC Group, which consists in extending the distribution network of the CEDC Group,

h) he managed the Company with due diligence and he made that the Company is able to achieve a certain level of turnover.

§ 3

4. The Parties of this Agreement agrees that for entering the Share Purchase Agreement, signed between the Shareholder and Carey Agri International Poland Sp. z o.o. (member if CEDC holding) on the November 14^th 2003, CEDC shall issue to the name of Piro Sp. z o.o. (being a company appointed by Shareholder) – 5,000 Shares in CEDC.

5. CEDC will issue 5,000 Shares in CEDC not later than to the 31^st of January 2004.

6. The Certificate for 5,000 shares will be delivered to the Shareholder within 45 days from the date of issuing.

7. Shares Certificates shall include 12-months lock-up period.

§ 4

5. The Parties agree that the validity hereof shall be contingent upon the consent of the Management Board of the CEDC capital group.

6. Each Party may terminate this Agreement in case of its breach by the other Party.

7. Each Party shall keep all information contained herein confidential. The above obligation shall not pertain to information that is publicly known and whose disclosure is required by law or for the proper performance hereof.

8. Any disputes arising from this Agreement shall be settled by the court competent for CEDC.

CEDC

Piotr Pabianski

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EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

CENTRAL EUROPEAN DISTRIBUTION CORPORATION

(Effective February 26, 2004)

1. OFFICES

1.1 Registered Office

The initial registered office of the Corporation shall be in Wilmington, Delaware, and the initial registered agent in charge thereof shall be Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.

1.2 Other Offices

The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or as may be necessary or useful in connection with the business of the Corporation.

2. MEETINGS OF STOCKHOLDERS

2.1 Place of Meetings

All meetings of the stockholders shall be held at such place as may be fixed from time to time by the Board of Directors, the Chairman of the Board or the President.

2.2 Annual Meetings

The Corporation shall hold annual meetings of stockholders, commencing with the year 1998, on such date and at such time as shall be designated from time to time by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President, at which stockholders shall elect a Board of Directors and transact such other business as may properly be brought before the meeting.

2.3. Special Meetings

Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President of the Corporation, and shall be called by the President or the Secretary of the Corporation at the request in writing of stockholders possessing at least 25 percent of the

voting power of the issued and outstanding voting stock of the Corporation entitled to vote generally for the election of directors. Such request shall include a statement of the purpose or purposes of the proposed meeting.

2.4 Notice of Meetings

Notice of any meeting of stockholders, stating the place, date and hour of the meeting, and (if it is a special meeting) the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting (except to the extent that such notice is waived or is not required as provided in the General Corporation Law of the State of Delaware (the “Delaware General Corporation Law”) or these Bylaws). Such notice shall be given in accordance with, and shall be deemed effective as set forth in, Section 222 (or any successor section) of the Delaware General Corporation Law.

2.5 Waivers of Notice

Whenever the giving of any notice is required by statute, the Certificate of Incorporation of the Corporation (which shall include any amendments thereto and shall be hereinafter referred to as so amended as the “Certificate of Incorporation”) or these Bylaws, a waiver thereof, in writing and delivered to the Corporation, signed by the person or persons entitled to said notice, whether before or after the event as to which such notice is required, shall be deemed equivalent to notice. Attendance of a stockholder at a meeting shall constitute a waiver of notice (a) of such meeting, except when the stockholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) (if it is a special meeting) of consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the stockholder objects to considering the matter at the beginning of the meeting.

2.6 Business at Special Meetings

Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice (except to the extent that such notice is waived or is not required as provided in the Delaware General Corporation Law or these Bylaws).

2.7 List of Stockholders

After the record date for a meeting of stockholders has been fixed, at least ten days before such meeting, the officer who has charge of the stock ledger of the Corporation shall make a list of all stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of meeting, or during ordinary business hours, at the principal place of business of the Corporation. Such list shall also, for the duration of the meeting, be produced and kept open to the examination of any stockholder who is present at the time and place of the meeting.

2.8 Quorum at Meetings

Stockholders may take action on a matter at a meeting only if a quorum exists with respect to that matter. Except as otherwise provided by statute or by the Certificate of Incorporation, the

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holders of a majority of the shares entitled to vote at the meeting, and who are present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. Where a separate vote by a class or classes is required, the holders of a majority of the outstanding shares of such class or classes, who are present in person or represented by proxy, shall constitute a quorum entitled to take action on that matter. Once a share is represented for any purpose at a meeting (other than solely to object (a) to holding the meeting or transacting business at the meeting, or (b) (if it is a special meeting) to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice), it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. The holders of a majority of the voting shares represented at a meeting, whether or not a quorum is present, may adjourn such meeting from time to time.

2.9. Voting and Proxies

Unless otherwise provided in the Delaware General Corporation Law or in the Corporation’s Certificate of Incorporation, and subject to the other provisions of these Bylaws, each stockholder shall be entitled to one vote on each matter, in person or by proxy, for each share of the Corporation’s capital stock that has voting power and that is held by such stockholder. No proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed appointment of proxy shall be irrevocable if the appointment form states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power.

2.10. Required Vote

When a quorum is present at any meeting of stockholders, all matters shall be determined, adopted and approved by the affirmative vote (which need not be by ballot) of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote with respect to the matter, unless the proposed action is one upon which, by express provision of statutes or of the Certificate of Incorporation, a different vote is specified and required, in which case such express provision shall govern and control the decision of such question. Where a separate vote by a class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class, unless the proposed action is one upon which, by express provision of statutes or of the Certificate of Incorporation, a different vote is specified and required, in which case such express provision shall govern and control the decision of such question. Notwithstanding the foregoing, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

2.11. Action Without a Meeting

Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such stockholders and may not be effected by any consent in writing by such stockholders, unless such consent is unanimous.

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2.12. Business at Annual Meeting

At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, a stockholder must have given timely notice thereof in writing to the Secretary of the Corporation.

For a proposal to be properly brought before an annual meeting by a stockholder, the stockholder must have given proper and timely notice thereof in writing to the Secretary of the Corporation as specified herein. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not later than the date that corresponds to 120 days prior to the date the Corporation’s proxy statement was released to stockholders in connection with the previous year’s annual meeting of stockholders. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business and any other stockholders known by such stockholder to be supporting such proposal, (iii) the class and number of shares of the stock that are held of record, beneficially owned and represented by proxy on the date of such stockholder notice and on the record date of the meeting (if such date shall have been made publicly available) by the stockholder and by any other stockholders known by such stockholder to be supporting such proposal on such dates, (iv) any financial interest of the stockholder in such proposal, and (v) all other information that would be required to be filed with the Securities and Exchange Commission if, with respect to any such item of business, such stockholder or stockholders were a participant in a solicitation subject to Section 14 of the Securities Exchange Act of 1934, as amended. The Board of Directors may reject any stockholder proposal not made strictly in accordance with the terms of this Section 2.12. Alternatively, if the Board of Directors fails to consider the validity of any stockholder proposal, the presiding officer of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that the stockholder proposal was not made in strict accordance with the terms of this Section 2.12 and, if the presiding officer should so determine, the presiding officer shall so declare at the annual meeting, and any such business or proposal not properly brought before the annual meeting shall not be acted upon at the annual meeting. This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors, and committees of the Board of Directors, but, in connection with such reports, no new business shall be acted upon at such annual meeting unless stated, filed and received as herein provided.

2.13 Inspectors of Votes.

The presiding officer of the meeting may appoint an inspector of votes to act at each meeting of the stockholders, unless the Board of Directors shall have theretofore made such appointment. The inspector of votes shall first subscribe an oath or affirmation faithfully to execute the duties of an inspector of votes at the meeting with strict impartiality and according to the best of such inspector’s ability. Such inspector of votes, if any, shall take charge of the ballots, if any, at the meeting, and after the balloting on any question, shall count the ballots cast and shall make a report in writing to the secretary of the meeting of the results of the balloting. An inspector of votes need not be a stockholder of the Corporation, and any officer of the Corporation may be an inspector of votes on any question other than a vote for or against such officer’s election to any position with the Corporation or on any other question in which such officer may be directly interested.

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3. DIRECTORS

3.1 Powers

The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things, subject to any limitation set forth in the Certificate of Incorporation or as otherwise may be provided in the Delaware General Corporation Law. The Board of Directors shall annually elect a Chairman of the Board from among its members and shall designate, when present, either the Chairman of the Board or the President to preside at its meetings. If neither the Chairman of the Board nor the President is present, the Board of Directors may designate another officer to preside at such meeting. The Chairman of the Board and the President may be the same person. The Board of Directors may also annually elect one or more Vice Chairmen from among its members, with such duties as the Board of Directors shall from time to time prescribe.

3.2. Number and Election

The term “entire Board of Directors” as used herein shall mean the total number of directors constituting the entire Board of Directors irrespective of the number of directors then in office or vacancies. The total number of directors constituting the entire Board of Directors shall be determined by resolution of the Board of Directors passed by the affirmative vote of at least two-thirds of the directors then in office, provided, that such number shall be consistent with the minimum and maximum number of directors set forth in the Certificate of Incorporation. Directors shall be elected at annual meetings of the stockholders, except as provided in Section 3.3 hereof, and each director elected shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal. Directors need not be stockholders.

3.3. Vacancies

Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority of the directors then in office, whether or not a quorum, or by a sole remaining director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by the sole remaining director so elected. Each director so chosen shall hold office until the next election, and until such director’s successor is elected and qualified, or until the director’s earlier resignation or removal. In the event that one or more directors resigns from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next election, and until such director’s successor is elected and qualified, or until the director’s earlier resignation or removal.

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3.4. Meetings

3.4.1. Regular Meetings

Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board of Directors.

3.4.2. Special Meetings

Special meetings of the Board may be called by the Chairman of the Board or President on one day’s notice to each director, either personally or by telephone, express delivery service (so that the scheduled delivery date of the notice is at least one day in advance of the meeting), telegram or facsimile transmission. The notice need not describe the purpose of a special meeting.

3.4.3. Telephone Meetings

Members of the Board of Directors may participate in a meeting of the Board by any communication by means of which all participating directors can simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

3.4.4. Action Without Meeting

Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board. The action must be evidenced by one or more written consents describing the action taken, signed by each director, and delivered to the Corporation for inclusion in the minute book.

3.4.5. Waiver of Notice of Meeting

A director may waive any notice required by statute, the Certificate of Incorporation or these Bylaws before or after the date and time stated in the notice. Except as set forth below, the waiver must be in writing, signed by the director entitled to the notice, and delivered to the Corporation for inclusion in the minute book. Notwithstanding the foregoing, a director’s attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

3.5 Quorum and Vote at Meetings

At all meetings of the Board, a quorum of the Board of Directors consists of the presence of a majority of the total number of directors constituting the entire Board of Directors. The affirmative vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these Bylaws.

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3.6 Committees of Directors

3.6.1. General

The Board of Directors may by resolution designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The qualifications for any director to serve on any committee of the Board shall be subject to the provisions of the Sarbanes-Oxley Act of 2002, the Rules and Regulations adopted by the Securities and Exchange Commission implementing the Sarbanes-Oxley Act of 2002, and all applicable rules of Nasdaq or any national securities exchange on which any securities of the Corporation are listed. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. If a member of a committee shall be absent from any meeting, or disqualified from voting thereat, the remaining member or members present and not disqualified from voting, whether or not such member or members constitute a quorum, may, by unanimous vote, appoint another member of the Board of Directors to act at the meeting in the place of such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors pursuant to Section 151(a) of the Delaware General Corporation Law, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of any shares of any series), adopting an agreement of merger or consolidation pursuant to Sections 251, 252, 257, 258, 263 or 264 of the Delaware General Corporation Law, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws; and unless the resolutions, these Bylaws or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Unless otherwise specified in the resolution of the Board of Directors designating the committee, at all meetings of each such committee of directors, a majority of the members of the committee shall constitute a quorum for the transaction of business, and the affirmative vote of a majority of the members of the committee present at any meeting at which there is a quorum shall be the act of the committee. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors, when required.

3.6.2. Compliance with Listing Requirements.

So long as any of the Corporation’s securities are listed on a national securities exchange or quoted on the Nasdaq National Market, the Corporation shall create, constitute and keep in effect any committees that may be required pursuant to the listing requirements of such national securities exchange or the Nasdaq National Market including but limited to an Audit Committee, a Compensation Committee

7

and a Nominating and Corporate Governance Committee. Each member of each such committee shall be “independent” as defined under both the Sarbanes-Oxley Act of 2002, and the rules promulgated thereunder, and the applicable rules of the national securities exchange or the Nasdaq National Market.

3.6.3. Nominating and Corporate Governance Committee

The Board of Directors shall establish a Nominating and Corporate Governance Committee authorized to (i) select nominees for director positions to be recommended by the Board of Directors for election as directors, (ii) fill any newly created director positions or any vacancies in director positions, and (iii) develop and recommend to the Board of Directors a set of corporate governance principles applicable to the Corporation, in addition to any other duties set forth in such committee’s charter. The Nominating/Corporate Governance Committee shall consist of at least three members. The approval of a majority of the members on the Nominating and Corporate Governance Committee shall be required in order for the Board of Directors to select any nominee for a director position.

3.6.4. Compensation Committee

The Board of Directors shall establish a Compensation Committee whose principal duties shall be (i) to review key employee compensation policies, plans and programs, (ii) to review and approve the compensation of the chief executive officer and the other executive officers of the Corporation, (iii) to review and approve any employment contracts, severance arrangements, change of control arrangements or similar arrangements between the Corporation and any executive officer of the Corporation, (iv) to review and consult with the chief executive officer concerning selection of officers, management succession planning, performance of individual executives and related matters, and (v) to administer the Corporation’s stock option plans, incentive compensation plan programs and any such plans that the Board of Directors may from time to time adopt and to exercise all the powers, duties and responsibilities of the Board of Directors with respect to such plans, in addition to any other duties set forth in such committee’s charter. The Compensation Committee shall consist of at least three members.

3.6.5. Audit Committee.

The Board of Directors shall establish an Audit Committee for the purpose of fulfilling the Board of Director’s oversight responsibilities regarding the Corporation’s and its subsidiaries’ accounting and systems of internal controls, the quality and integrity of the Corporation’s financial reports and the independence and performance of the Corporation’s outside auditor as set forth in the Audit Committee charter. The Audit Committee shall consist of at least three members. The approval of a majority of the entire Audit Committee shall be required to approve the appointment of the independent auditors of the Corporation and its consolidated subsidiaries and any change in such appointment. At least one member of the Audit Committee shall be an “Audit Committee Financial Expert” as such term is defined in the rules promulgated pursuant to the Sarbanes-Oxley Act of 2002.

3.7 Compensation of Directors.

As expressly provided by resolution adopted by the Board of Directors, and subject to the provisions of the Sarbanes-Oxley Act of 2002, the Rules and Regulations adopted by the Securities

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and Exchange Commission implementing the Sarbanes-Oxley Act of 2002, and all applicable rules of Nasdaq or any national securities exchange on which any securities of the Corporation are listed, the directors may, as such, receive remuneration for their services; and the Board of Directors may at any time and from time to time by resolution provide that a specified sum shall be paid to any director of the Corporation, either as such director’s annual remuneration as such director or member of any committee of the Board of Directors or as remuneration for such director’s attendance at each meeting of the Board of Directors or any such committee. The Board of Directors may also likewise provide that the Corporation shall reimburse each director for any expenses paid by such director on account of such director’s attendance at any meeting. Nothing in this Section 3.7 shall be construed to preclude any director from serving the Corporation in any other capacity and receiving remuneration therefor.

3.8. Nomination of Directors

Only persons who are nominated in accordance with the procedures set forth in this Section 3.8 shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Nominating and Corporate Governance Committee of the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with notice procedures set forth in this Section 3.8. Such nominations, other than those made by or at the direction of the Nominating and Corporate Governance Committee of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder notice shall be delivered to or mailed and received at the principal executive office of the Corporation not later than the date that corresponds to 120 days prior to the date the Corporation’s proxy statement was released to stockholders in connection with the previous year’s annual meeting of stockholders. Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation’s stock which are beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person’s written consent to be named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such stockholder, (ii) the class and number of shares of the Corporation’s stock which are beneficially owned by such stockholder and (iii) any other information relating to such stockholder that is required to be furnished pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in the stockholder’s notice of nomination which pertains to the nominee. No later than the tenth day following the date of receipt of a stockholder nomination submitted pursuant to this Section 3.8, the Nominating and Corporate Governance Committee of the Board of Directors of the Corporation shall, if the facts warrant, determine and notify in writing the stockholder making such nomination that such nomination was not made in accordance with the time limits and/or other procedures prescribed by the bylaws. If no such notification is mailed to such stockholder within such ten-day period, such nomination shall be deemed to have been made in accordance with the provisions of this Section 3.8. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.8.

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4. OFFICERS

4.1 Positions

The officers of the Corporation shall be a Chairman of the Board, a President, a Chief Executive Officer, a Chief Financial Officer, a Secretary and a Treasurer, and such other officers as the Board of Directors from time to time may appoint, including one or more Vice Chairpersons, a Chief Operating Officer, Executive Vice Presidents, a General Counsel, Senior Vice Presidents, Vice Presidents, Assistant Secretaries and Assistant Treasurers. Each such officer shall exercise such powers and perform such duties as shall be set forth below and such other powers and duties as from time to time may be specified by the Board of Directors or by any officer(s) authorized by the Board of Directors to prescribe the duties of such other officers. Any number of offices may be held by the same person, except that in no event shall the President and the Secretary be the same person. Each of the Chairman of the Board, the President and Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, and/or any Executive Vice President or Senior Vice President may execute bonds, mortgages and other documents under the seal of the Corporation, except where required or permitted by law to be otherwise executed and except where the authorization therefor shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation.

4.2. Chairman of the Board

The Chairman of the Board shall (when present) preside at all meetings of the Board of Directors and stockholders and shall ensure that all orders and resolutions of the Board of Directors are carried into effect. Unless the Board shall designate a person other than the Chairman as the President and Chief Executive Officer, the Chairman of the Board shall also be the President and Chief Executive Officer of the Corporation, and as such shall have overall executive responsibility and authority for management of the business, affairs and operations of the Corporation (subject to the authority of the Board of Directors). As President and Chief Executive Officer, the Chairman of the Board shall, in general, perform all duties incident to the office of a president and chief executive officer of a corporation, including those duties customarily performed by persons holding such offices, and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors.

4.3 Chief Executive Officer

Subject to the authority of the Board of Directors, the Chief Executive Officer shall have overall executive responsibility and authority for management of the business, affairs and operations of the Corporation, and, in general, shall perform all duties incident to the office of a chief executive officer of a corporation, including those duties customarily performed by persons holding such office, and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors.

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4.4. President

The President shall be the chief operating officer of the Corporation and shall have responsibility and authority for management of the day-to-day operations of the Corporation, subject to the authority of the Chief Executive Officer and the Board of Directors and, in general, shall perform all duties incident to the office of a president of a corporation including those duties customarily performed by persons holding such office and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors.

4.5. Chief Financial Officer

The Chief Financial Officer of the Corporation shall have general charge and supervision of the financial affairs of the Corporation, including budgetary, accounting and statistical methods, and shall approve payment, or designate others serving under him to approve for payment, all vouchers and warrants for disbursements of funds, and, in general, shall perform such other duties as are incident to the office of a chief financial officer of a corporation, including those duties customarily performed by persons occupying such office, and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors, the President or Chief Executive Officer.

4.6. Chief Operating Officer

The Chief Operating Officer of the Corporation shall have general charge and supervision of the day to day operations of the Corporation (subject to the direction of the President and the authority of the Board of Directors), and, in general, shall perform such other duties as are incident to the office of a chief operating officer of a corporation, including those duties customarily performed by persons occupying such office, and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors, or the President or Chief Executive Officer.

4.7. General Counsel

The General Counsel of the Corporation shall be responsible for supervising the legal affairs of the Corporation, and, in general, shall perform such other duties as are incident to the office of a general counsel of a corporation, including those duties customarily performed by persons occupying such office, and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors, the President or Chief Executive Officer.

4.8. Vice President

In the absence of the President or in the event of the President’s failure or refusal to act, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President and Chief Executive Officer. The Vice President or Vice Presidents, in general, shall perform such other duties as are incident to the office of a vice president of a corporation, including those duties customarily performed by persons occupying such office, and shall perform such other duties as, from time to time, may be assigned to him or her or them by the Board of Directors, the President or Chief Executive Officer. The Board of Directors may designate one or more Vice Presidents as Executive Vice Presidents or Senior Vice Presidents.

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4.9. Secretary

The Secretary, or an Assistant Secretary, shall attend all meetings of the Board of Directors and all meetings of the stockholders, and shall record all the proceedings of the meetings of the stockholders and of the Board of Directors in a book to be kept for that purpose, and shall perform like duties for the standing committees, when required. The Secretary shall have custody of the corporate seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed it may be attested by the signature of the Secretary or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by such officer’s signature. The Secretary or an Assistant Secretary may also attest all instruments signed by the President and Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer or any Vice President. The Secretary, or an Assistant Secretary, shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and, in general, shall perform all duties as are incident to the office of a secretary of a corporation, including those duties customarily performed by persons occupying such office, and shall perform such other duties as, from time to time, may be assigned to him or her by the Board of Directors, the President, Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer or any Executive Vice President.

4.10. Assistant Secretary

The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of the Secretary’s inability or refusal to act or when requested by the Chairman of the Board, the President and Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer or any Executive Vice President, perform the duties and exercise the powers of the Secretary, and, in general, shall perform all duties as are incident to the office of an assistant secretary of a corporation, including those duties customarily performed by persons holding such office, and shall perform such other duties as, from time to time, may be assigned to him or her or them by the Board of Directors, the President, Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any Executive Vice President or the Secretary. An Assistant Secretary may or may not be an officer, as determined by the Board of Directors.

4.11. Treasurer

The Treasurer shall have responsibility for the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall also render to the President and Chief Executive Officer and the Chief Operating Officer, upon request, and to the Board of Directors at its regular meetings, or when the Board of Directors so requires, an account of all financial transactions and of the financial condition of the Corporation and, in general, shall perform such duties as are incident to the office of a treasurer of a corporation, including those customarily performed by persons occupying such office, and shall perform all other duties as, from time to time, may be assigned to him or her by the Board of Directors, the President, Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer or any Executive Vice President.

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4.12. Assistant Treasurer

The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there shall have been no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer’s inability or refusal to act, perform the duties and exercise the powers of the Treasurer, and, in general, shall perform all duties as are incident to the office of an assistant treasurer of a corporation, including those duties customarily performed by persons occupying such office, and shall perform such other duties as, from time to time, may be assigned to him or them by the Board of Directors, the President, Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any Executive Vice President or by the Treasurer. An Assistant Treasurer may or may not be an officer, as determined by the Board of Directors.

4.13. Term of Office

The officers of the Corporation shall hold office until their successors are chosen and qualify or until their earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. Any officer elected or appointed by the Board of Directors may be removed at any time, with or without cause, by the affirmative vote of a majority of the directors constituting the entire Board of Directors.

4.14. Compensation

The compensation of officers of the Corporation shall be fixed by the Compensation Committee of the Board of Directors.

4.15. Fidelity Bonds

The Corporation may secure the fidelity of any or all of its officers or agents by bond or otherwise.

5. CAPITAL STOCK

5.1 Certificates of Stock; Uncertificated Shares

The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates, and upon request every holder of uncertificated shares, shall be entitled to have a certificate (representing the number of shares registered in certificate form) signed in the name of the Corporation by the Chairman of the Board, President or any Vice President, and by the Treasurer, Secretary or any Assistant Treasurer or Assistant Secretary of the Corporation. Any or all the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar whose signature or facsimile signature appears

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on a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

5.2 Lost Certificates

The Board of Directors, Chairman of the Board, President, Chief Executive Officer, Chief Financial Officer or Secretary may direct a new certificate of stock to be issued in place of any certificate theretofore issued by the Corporation and alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming that the certificate of stock has been lost, stolen or destroyed. When authorizing such issuance of a new certificate, the Board or any such officer may, as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or such owner’s legal representative, to advertise the same in such manner as the Board or such officer shall require and/or to give the Corporation a bond or indemnity, in such sum or on such terms and conditions as the Board or such officer may direct, as indemnity against any claim that may be made against the Corporation on account of the certificate alleged to have been lost, stolen or destroyed or on account of the issuance of such new certificate or uncertificated shares.

5.3 Record Date

5.3.1. Actions by Stockholders

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty days nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, unless the Board of Directors fixes a new record date for the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by the Delaware General Corporation Law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in the manner prescribed by Section 213(b) of the Delaware General Corporation Law. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by the Delaware General Corporation Law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

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5.3.2. Payments

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

5.3.3. Stockholders of Record

The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to receive notifications, to vote as such owner, and to exercise all the rights and powers of an owner. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise may be provided by the Delaware General Corporation Law.

6. INDEMNIFICATION

6.1 Authorization of Indemnification

Each person who was or is a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether by or in the right of the Corporation or otherwise (a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee, partner (limited or general) or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, including service with respect to an employee benefit plan, shall be (and shall be deemed to have a contractual right to be) indemnified and held harmless by the Corporation (and any successor to the Corporation by merger or otherwise) to the fullest extent authorized by, and subject to the conditions and (except as provided herein) procedures set forth in the Delaware General Corporation Law, as the same exists or may hereafter be amended (but any such amendment shall not be deemed to limit or prohibit the rights of indemnification hereunder for past acts or omissions of any such person insofar as such amendment limits or prohibits the indemnification rights that said law permitted the Corporation to provide prior to such amendment), against all expenses, liabilities and losses (including attorneys’ fees, judgments, fines, ERISA taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith; provided, however, that the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person (except for a suit or action pursuant to Section 6.2 hereof) only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. Persons who are not directors or officers of the Corporation may be similarly indemnified in respect of such service to the extent authorized at any time by the Board of Directors of the Corporation. The indemnification conferred in this Section 6.1 also shall include the

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right to be paid by the Corporation (and such successor) the expenses (including attorneys’ fees) incurred in the defense of or other involvement in any such proceeding in advance of its final disposition; provided, however, that, if and to the extent the Delaware General Corporation Law requires, the payment of such expenses (including attorneys’ fees) incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer to repay all amounts so paid in advance if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section 0 or otherwise; and provided further, that, such expenses incurred by other employees and agents may be so paid in advance upon such terms and conditions, if any, as the Board of Directors deems appropriate.

6.2. Right of Claimant to Bring Action Against the Corporation

If a claim under Section 6.1 is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring an action against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed or is otherwise not entitled to indemnification under Section 6.1 but the burden of proving such defense shall be on the Corporation. The failure of the Corporation (in the manner provided under the Delaware General Corporation Law) to have made a determination prior to or after the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law shall not be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Unless otherwise specified in an agreement with the claimant, an actual determination by the Corporation (in the manner provided under the Delaware General Corporation Law) after the commencement of such action that the claimant has not met such applicable standard of conduct shall not be a defense to the action, but shall create a presumption that the claimant has not met the applicable standard of conduct.

6.3. Non-exclusivity

The rights to indemnification and advance payment of expenses provided by Section 6.1 hereof shall not be deemed exclusive of any other rights to which those seeking indemnification and advance payment of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.

6.4. Survival of Indemnification

The indemnification and advance payment of expenses and rights thereto provided by, or granted pursuant to, Section 6.1 hereof shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee, partner or agent and shall inure to the benefit of the personal representatives, heirs, executors and administrators of such person.

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6.5. Insurance

The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, partner (limited or general )or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise, against any liability asserted against such person or incurred by such person in any such capacity, or arising out of such person’s status as such, and related expenses, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of the Delaware General Corporation Law.

7. GENERAL PROVISIONS

7.1. Inspection of Books and Records

Any stockholder, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office or at its principal place of business.

7.2 Dividends

The Board of Directors may declare dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation and the laws of the State of Delaware.

7.3 Reserves

The directors of the Corporation may set apart, out of the funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and may abolish any such reserve.

7.4 Execution of Instruments

All checks, drafts or other orders for the payment of money, and promissory notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

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7.5 Fiscal Year

The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

7.6 Seal

The corporate seal shall be in such form as the Board of Directors shall approve. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

7.7. Pronouns

All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or entity may require.

7.8 Amendments

The Board of Directors or the stockholders may from time to time adopt, amend or repeal the Bylaws of the Corporation. Such action by the Board of Directors shall require the affirmative vote of at least a majority of the directors then in office at a duly constituted meeting of the Board of Directors called for such purpose. Such action by the stockholders shall require the affirmative vote of the holders of at least a majority of the outstanding shares of stock of the Corporation entitled to vote thereon at a duly constituted meeting of stockholders called for such purpose.

* * * * *

Adopted this 26th day of February 2004.

/s/ James Archbold

Name: James Archbold

Title: Secretary

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EX-10.11

Exhibit 10.11

ANNEX NO. 2

TO THE LEASE AGREEMENT

Concluded on February 19, 2003 in Warsaw

Between:

1. Omega Invest Sp. z o.o. with its registered seat in Warsaw at ul. Bokserska 66, entered into the register of entrepreneurs kept by the District Court for the capital city of Warsaw in Warsaw, XX Commercial Division of the National Court Register, under the number KRS 21203, represented by Mr. Philippe Pannier, President of the Management Board, duly authorized for this purpose hereinafter referred to as the “Lessor”

on the one hand,

and

2. Carey Agri International Poland Sp. z o.o., with its registered seat in Warsaw at ul. Bokserska 66 A, entered into the register of entrepreneurs kept by the District Court for the capital city of Warsaw in Warsaw, XX Commercial Division of the National Court Register, under the number KRS 51098 , represented by Mr. William V.Carey, Member of the Management Board, duly authorized for this purpose, hereinafter referred to as the “Lessee”

on the other hand

The Lessor and the Lessee may be further individually referred to as “Party” and collectively as “Parties”.

WHEREAS:

A. On March 7, 2000, the Parties entered into an agreement on lease of warehouse and office premises located at ul. Bokserska 66 A (previously Cybernetyki 17 B) in Warsaw (“Lease Agreement”).

B. On May 30, 2001, the Parties entered into Annex number 1 to the Lease Agreement.

C. The Parties have subsequently mutually agreed to amend the principles of their cooperation and to introduce new changes to the Lease Agreement.

TAKING THE ABOVE INTO ACCOUNT, THE PARTIES MUTUALLY AGREE AS FOLLOWS:

1. The Parties mutually agree that the period of lease described in Article 10 of the Lease Agreement will be automatically prolonged for a defined term of 7 (seven) years as from May 1, 2003 (“Extension Period”).

2. The Lessor shall deliver to the Lessee additional 250 to 300 square meters of existing grade A office space at the end of the existing facility the latest on November 28, 2004 on the Lessor expense (“Additional A Office”).

3. Throughout the entire Extension Period, the Lessee will pay to the Lessor the lease rent in the following amounts:

3.1. For the Warehouse Space - the equivalent in PLN of the amount of USD 5,625 (five dollars and six hundred twenty five thousandths) plus VAT per one month of lease of one square meter of the Warehouse Space.

3.2. For the A Office and Additional A Office - the equivalent in PLN of the amount of USD 17,75 (seventeen and seventy-five hundredths) plus VAT per one month of lease of one square meter of the A Office and Additional A Office.

3.3. For the B Office - the equivalent in PLN of the amount of USD 14,50 (fourteen and fifty hundredths) plus VAT per one month of lease of one square meter of the B Office.

4. The Lessor leases to the Lessee and the Lessee leases from the Lessor 94 (ninety-four) parking spaces located in the parking area adjacent to the Building (“Parking Spaces”) for the entire Extension Period. The amount of the lease rent due to the Lessor for the lease of the Parking Spaces is included in the amount of lease rents described in Clause 3 of this Annex.

5. Amounts of lease rent mentioned above are not the subject of indexation.

6.1 The amounts of lease rent mentioned in Clause 3 of this Annex will be increased by VAT at the appropriate rate.

6.2 The Lessee shall pay the lease rent shall be payable monthly on the basis of the invoices issued by the Lessor to the Lessee in PLN equivalent of the USD lease rent amount. The amounts in PLN will be calculated in accordance with the average exchange rate of USD/PLN published by the National Bank of Poland in force on the date of the Lessor’s invoice. The Lessor will issue the invoices for lease rent as long as it is obliged to do so under the provision of Polish law. As soon as the Lessor is allowed to issue the invoices in USD, the amounts of lease rent will not be converted into PLN.

6.3 The Lessor shall issue and deliver to the Lessee the property issued invoices for the payment of the lease rent on the last working day of the month preceding the month, for which the lease rents are due. The Lessee shall pay the invoice within 10 (ten) calendar days from the receipt of the invoice.

7. The Lessee shall commence to pay the lease rents set forth in Clause 3 of this Annex on May 1, 2003 and will continue to pay them until the date of termination of the Extension Period. Until April 30, 2003, the Lessee will continue to pay to the Lessor the Rent as set forth in the provisions of the Lease Agreement.

8. The Parties mutually agree that the Lessee will have the right to replace the actual cash deposit within three months of signing of this Annex with a bank guarantee, the amount of which will be equal to three month’s all rents set forth in Clause 3 of this Annex increased by applicable VAT. Such bank guarantee must be irrevocable, transferable and payable on the first demand of the Lessor and it must be issued by a bank approved by the Lessor. The wording of the bank guarantee must be approved by the Lesssor in writing before it’s issuing by the bank. Once received by the Lessor, the Lessor is obliged to return the cash deposit to the Lessee within 7 days.

9. The Parties mutually agree that the Lessee shall be allowed to sublease any part of the subject of lease or any part thereof without the Lessor’s consent only to the companies being the subsidiaries of the Lessee. Nonetheless, the Parties agree that Lessee is liable towards the Lessor for all obligations of Lessee under this Agreement the fact of subleasing notwithstanding.

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10. The Parties mutually agree that the Lessee shall be allowed to sublease any part of the subject of the lease or any part thereof to companies other than subsidiaries of the Lessee with the Lessor’s consent. The Lessor agrees not to unreasonably withhold or delay such consent.

11. All terms written with a capital letter in this Annex and not defined herein have the same meaning as in the Lease Agreement.

12. All provisions of the Lease Agreement not changed by the provisions of this Annex remain unchanged.

13. This Annex has been drawn up in four counterparts, two identical counterparts in English language and two identical counterparts in Polish language. Each party received one English and one Polish counterpart of this Annex. In the event of any discrepancies between the English and Polish versions hereof, the English version of this Annex shall prevail.

William V.Carey	Philippe Pannier
Carey Agri International Poland Sp. z o.o.	Omega Invest Sp. z o.o.

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EX-21

Exhibit 21

Name	Jurisdiction of Organization
Carey Agri International Poland Sp. z o.o.	Poland
Multi Trade Company Sp. z o.o.	Poland
Piwnica Wybornych Win Sp. z o.o.	Poland
Polskie Hurtownie Alkoholi Sp. z o.o.	Poland
Astor Sp. z o.o.	Poland
Damianex S.A.	Poland
Agis S.A.	Poland
Onufry S.A.	Poland
Dako Galant Sp. z o.o.	Poland
Panta Hurt Sp. z o.o.	Poland
Multi-Ex S.A.	Poland

EX-23

Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 dated October 9, 1998 and Form S-8 dated August 19, 2003 pertaining to the 1997 Stock Incentive Plan of Central European Distribution Corporation and Form S-3 dated April 23, 2003 pertaining to the common stock issued by Central European Distribution Corporation in private placement of our report dated March 11, 2004 relating to the financial statements of Central European Distribution Corporation included in the Form 10-K for the year ended December 31, 2003.

PricewaterhouseCoopers Sp. z o.o.

Warsaw, Poland

March 11, 2004

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 dated October 9, 1998 and Form S-8 dated August 19, 2003 pertaining to the 1997 Stock Incentive Plan of Central European Distribution Corporation and Form S-3 dated April 23, 2003 pertaining to the common stock issued by Central European Distribution Corporation in private placement of our report dated March 14, 2003 relating to the financial statements of Central European Distribution Corporation included in the Form 10-K for the year ended December 31, 2003.

Ernst & Young Audit Sp. Z o.o.

Warsaw, Poland

March 11, 2004

Opinion of Independent Auditor

To the Board of Directors and Shareholders

of Central European Distribution Corporation

We have audited the accompanying consolidated balance sheet of Central European Distribution Corporation and subsidiaries as of December 31, 2002, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2002, appearing on pages 36 through 39 of the Central European Distribution Corporation’s 2003 Annual Report to Shareholders which has been included in this Form 10-K. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We have not audited the consolidated financial statements of Central European Distribution Corporation and subsidiaries for any period subsequent to December 31, 2002.

We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Central European Distribution Corporation and subsidiaries at December 31, 2002, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

March 14, 2003

Ernst & Young Audit Sp. Z o.o.

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, William V. Carey, President and Chief Executive Officer of Central European Distribution Corporation, certify that:

1. I have reviewed this Annual Report on Form 10-K of Central European Distribution Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2004

By:	/s/    WILLIAM V. CAREY
	William V. Carey President and Chief Executive Officer (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Neil A.M. Crook, Vice President and Chief Financial Officer of Central European Distribution Corporation, certify that:

1. I have reviewed this Annual Report on Form 10-K of Central European Distribution Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2004

By:	/s/    NEIL A.M. CROOK
	Neil A.M. Crook Chief Financial Officer (principal financial officer)

EX-32.1

Exhibit 32.1

Written Statement of Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, the Chief Executive Officer of Central European Distribution Corporation (the “Company”), hereby certifies that, to his knowledge on the date hereof:

(a) the Form 10-K of the Company for the fiscal year ended December 31, 2003, filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 15, 2004

/s/    WILLIAM V. CAREY        

William V. Carey

Chairman, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Written Statement of Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The undersigned, the Chief Financial Officer of Central European Distribution Corporation (the “Company”), hereby certifies that, to his knowledge on the date hereof:

(c) the Form 10-K of the Company for the fiscal year ended December 31, 2003, filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(d) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: March 15, 2004

/s/    NEIL CROOK        

Neil Crook

Vice President and Chief Financial Officer